Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

BERKSHIRE BILL [Lords] (By Order)

Order for Second Reading read.

To be read a Second time tomorrow.

YORKSHIRE WATER AUTHORITY BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Monday 22 July at Seven o'clock.

EAST LOTHIAN DISTRICT COUNCIL (MUSSELBURGH LINKS ETC.) ORDER CONFIRMATION BILL

SHETLAND ISLANDS COUNCIL ORDER CONFIRMATION BILL

Considered; to be read the Third time.

Oral Answers to Questions — SOCIAL SERVICES

Care in the Community

Mr. Fisher: asked the Secretary of State for Social Services how many people he estimates have or will come out of long-stay sub-normality hospitals under the care in the community policy in 1984, 1985 and 1986, respectively.

The Minister for Health (Mr. Kenneth Clarke): There were 31,500 discharges of people from mental handicap hospitals and units during 1983, the latest year for which figures are available. However, 27,500 of the discharges followed periods in hospital of less than one month. Only 1,800 followed periods of two or more years and, within this figure, 760 patients had been in hospital for over 15 years. Figures for 1984 should be available in September. We cannot yet make estimates for future years.

Mr. Fisher: Will the Minister confirm that in many authorities the funds are not available to provide the full range of community care that is needed by those who have been in hospital for a long time? Will he speak to the Secretary of State for the Environment and ask for a 100 per cent. disregard for such funds, or will the Government continue to penalise local authorities which are trying to provide the services which these people so desperately need?

Mr. Clarke: Many of the services for discharged patients who have been long-term stayers in hospitals are

provided by health authorities, which are substantially increasing their spending in this area. Local social service departments throughout the country have increased their spending on social services as a whole by 17 per cent. over and above inflation over the past five years, and many are making good progress. I do not believe that local authorities which are making a proper choice of priorities are inhibited from joining in the care in the community policy.

Mrs. Virginia Bottomley: Is my right hon. and learned Friend aware that there is widespread concern about the many children who continue to be admitted to long-stay sub-normality hospitals?

Mr. Clarke: I share my hon. Friend's concern. I am glad to say that the number of mentally handicapped children in hospital has dropped by 50 per cent. during the Government's period in office, but we would like to see them all out of hospital. That is why we have allocated so much money for that purpose. I hope that all admissions will stop soon.

Mr. Carter-Jones: Will the Minister consider the problem that arises from the effect of tapering on joint funding in the discharge of long-term patients? Will he take into account especially the problems that are faced by Prestwich?

Mr. Clarke: The rules on disregarding joint finance for local government spending purposes have been eased slightly, but the joint finance was always intended to taper after the requisite period. We have given new powers so that health authorities can provide funds without any time limit where it is intended to move long-stay patients out of hospitals.

Mr. Alfred Morris: Will the Minister make himself fully and urgently aware of the compelling case put to the all-party disablement group about children in mental hospitals when Peggy Jay and her colleagues from Exodus came to address the group earlier this month? Is he aware that there are still 450 children in such hospitals and that four more have been added this year? If some regional health authorities can tackle the problem positively, why not all of them?

Mr. Clarke: I agreed with my hon. Friend the Member for Surrey, South-West (Mrs. Bottomley) when I expressed the wish that all admissions could now cease. The fact that only four have taken place this year shows that we are near the end of the problem. The number of children in those long-stay wards dropped by over a half. We have provided money to enable health authorities to get the remainder out. I share the all-party group's aims, and I hope that we shall soon realise them.

Mr. Meadowcroft: Is the Minister aware that MIND on Merseyside has reached an agreement with the health authority by which the health authority will pay £14,000 a year for every person taken out of institutions in that area? If he believes that to be good practice, will he Commend it to other health authorities?

Mr. Clarke: Certainly, I shall. Almost all health authorities now have some variant of those arrangements. It is important that they should all have plans whereby they can obtain the better services required for those patients by paying the correct sum to other health authorities, if


they are to take over the obligation, to local authorities or to voluntary bodies, including those such as MIND, which have a good record.

Private Mental Health Facilities

Mr. Thurnham: asked the Secretary of State for Social Services what are the criteria for registering private mental health facilities with the National Health Service.

Mr. Kenneth Clarke: The criteria for registering a private mental nursing home are for the district health authority in whose area the home is located to determine, having regard to the provisions of the Registered Homes Act 1984, the Nursing Homes and Mental Nursing Homes Regulations 1984 and the Mental Health Act 1983.

Mr. Thurnham: Is my right hon. and learned Friend satisfied that existing codes of practice are of a sufficiently high standard, without being too strict, and that they can be enforced without new legislation?

Mr. Clarke: Yes, Mr. Speaker, I am. If there is a dispute between a proprietor and a local health authority the matter can be determined on appeal to the registered homes tribunal, which the Government set up under the legislation that I have just set out.

"The Reform of Social Security"

Mr. Yeo: asked the Secretary of State for Social Services what further representations he has received regarding the Green Paper "The Reform of Social Security".

The Secretary of State for Social Services (Mr. Norman Fowler): By today some 450 representations have been received about the Government's proposals for the reform of social security.

Mr. Yeo: Is my right hon. Friend aware that of the many welcome aspects of these proposals one of the most important is the arrangement whereby benefit will be withdrawn on a tapering basis in relation to net rather than gross income? Is he further aware that many employers in my constituency have drawn attention to further examples of how the present system acts as a disincentive to people seeking jobs?

Mr. Fowler: I entirely agree with my hon. Friend. That change will mean that we can tackle the unemployment and poverty traps in a way that has not been possible until now.

Mr. Hugh Brown: Many of my constituents are, unfortunately, in receipt of supplementary benefit. When shall I be able to advise these practical people whether they will be better or worse off after the reviews?

Mr. Fowler: The hon. Gentleman will be aware of our proposals in the Green Paper. In the White Paper we shall put forward illustrative figures, but, of course, ultimately he will have to await the uprating in April 1987 to know the exact rates.

Mr. Ralph Howell: Does my right hon. Friend accept that there is no way in which he or anyone else can solve the unemployment or the poverty traps unless tax is brought into the equation? So long as tax and social security are kept separate, there is no way in which the poverty or unemployment traps will be solved.

Mr. Fowler: I am aware of my hon. Friend's interest in this matter. In the Green Paper he will have seen a number of ways in which the two sytems are moving closer together. He will also be aware that in the autumn my right hon. Friend the Chancellor of the Exchequer will be making his personal taxation proposals.

Nurses (Pay)

Mr. Willie W. Hamilton: asked the Secretary of State for Social Services if he will make a statement on nurses' pay and the representations made to him on the recent proposals of Her Majesty's Government in response to the review body's recommendations.

Mr. Fowler: Following my right hon. Friend the Prime Minister's announcement on nurses' pay on 6 June, we have received a number of letters. Most have concerned the staging of the award and its funding. Agreement has now been reached with the staff side on all the new salary scales, which were notified to health authorities on 1 July.

Mr. Hamilton: Is the Secretary of State aware that anyone interested in the Health Service was appalled by the miserable ministerial speeches made in yesterday's debate? Does he recognise that for every percentage point over 3 per cent. paid to nurses and others there will be a diminution in the standard of service to patients, because of the tight cash limits imposed on the local health authorities? Does he further recognise that even with the 5·6 per cent. increase that is to be given to nurses—those dedicated people—between now and February they will have to suffer a reduction in their standard of living?

Mr. Fowler: I do not agree with anything that the hon. Gentleman has said, including his comments on the outstanding speeches made by my right hon. and learned Friend the Minister for Health and my hon. Friend the Under-Secretary of State for Health and Social Security. Since 1979, nurses' pay has gone up by 23 per cent. above inflation. After the review pay award, their pay will have increased by between 25 and 30 per cent. The Government set up the independent pay review body which the nurses wanted, a desire which the Labour party ignored.

Mr. Colvin: Will my right hon. Friend recognise the unique importance of midwives, even if the pay review does not? Will he ensure that in the final recommendation midwives' pay is related to their contemporaries who remain in nursing or who progress to health visiting?

Mr. Fowler: I am sure that the review body will take that into account. We recognise the great importance of midwives in the Health Service.

Mr. Pavitt: Will the right hon. Gentleman confirm that the pay award was, on average, 8·5 per cent., possibly rising to 14 per cent. for some grades, but that in the year 1985–86 nurses will receive an average of 5·6 per cent.? Will he now look at another problem that he has not solved—that of bottle-necks? Is he aware that in hospitals near here there is such a shortage of neonatal nurses that, although there is sufficient cash, the service is run in a way that is hazardous to the health of patients? Is he further aware that there is a shortage of theatre sisters and sister tutors?

Mr. Fowler: I shall examine any specific issue that the hon. Gentleman wishes to draw to my attention. The


review body recommendations mean that nurses' pay will increase from between 4·1 and 14·3 per cent., and for professions auxiliary to medicine by up to 16·6 per cent. The award has to be staged, but by the beginning of the new financial year all those changes will be in place. This is an outstanding award for the nurses and it would do the hon. Gentleman more credit if he recognised it.

Mr. Marlow: Why, when the Northampton district area health authority, which is one of the most economic and efficient health authorities in the country, can provide for nurses' pay without a cut in services, do the more profligate authorities seem to have a problem? Is it that the Labour party wants a propaganda weapon with which to beat the Government over the head, when, in fact, the health authorities could do the job properly?

Mr. Fowler: Few health authorities are complaining that they are unable to manage. One or two of those that are complaining are the ones which complain about virtually everything. At the beginning of this year we provided £500 million more cash for health authorities in England. The stage award that we have announced for this year can be afforded out of that.

Mr. Kennedy: Has the right hon. Gentleman seen the reported response by Mr. Trevor Clay of the Royal College of Nursing to the speech made by the Under-Secretary of State for Health and Social Security yesterday? If so, what is the Secretary of State's response?

Mr. Fowler: I have seen the letter that Mr. Clay wrote to The Times this morning, if that is what the hon. Gentleman is talking about. If the hon. Gentleman wishes to talk about nurses' pay, he should check with Mr. Clay whether he and the RCN supported the setting up of an independent pay review body. This Government have achieved that. The Labour Government ignored the problem.

Mr. Campbell-Savours: Has the Secretary of State seen the Nursing Mirror survey, which reveals that 90 per cent. of all nurses believe that their wards are dangerously understaffed, and shows that trainee nurses are responsible for the manning of wards at night? Is that fair, and how does the Secretary of State justify that? The voice of the profession demands action.

Mr. Fowler: That question is not fair, because the Government have put more money and resources into the Health Service than the Labour Government did. Above all, we have put more money into the Health Service capital building programme. The hon. Gentleman's question reveals that he is unaware that the last Labour Government cut the capital programme.

Single Homeless Persons

Mr. Hirst: asked the Secretary of State for Social Services what representations he has received about the provisions for the single homeless in west central Scotland; and if he will make a statement.

The Minister for Social Security (Mr. Tony Newton): Provision for the single homeless is primarily for local authorities to determine. My right hon. Friend the Secretary of State for Social Services has, however, a responsibility to provide temporary places for people without a settled way of life. In west central Scotland, the Department currently runs the Bishopbriggs resettlement

unit for this purpose. As my hon. Friend is aware, it is our policy progressively to close these units, in parallel with measures to develop more appropriate alternative provision. In the case of Bishopbriggs, our aim is to close it within the next three years, and a review team chaired by the Department and including representatives of the Scottish Council for the Single Homeless and local housing interests is currently, through a process of consultation, assessing the needs of the single homeless in the area and considering proposals for alternative facilities. My hon. Friend has written to me about the matter, as has the hon. Member for Dundee, East (Mr. Wilson) and one member of the public.

Mr. Hirst: I am grateful to my hon. Friend for that reply. Is he aware that there is considerable concern in west central Scotland about the Department's proposal to close the resettlement unit at Bishopbriggs, which has in the past provided a refuge for single homeless people? Is he prepared to extend the consultation period, and will he give a commitment to retain the unit if the consultations show a pressing need for it?

Mr. Newton: My hon. Friend knows that we are determined that this shall be part of a programme of ensuring proper alternative provision. In that spirit, I am happy to say that I would be willing to extend the consultation period to the end of this year. The same will apply to the other seven units which we have in mind for relatively early closure.

Mr. Maxton: Will the Minister take an early opportunity to visit the Bishopbriggs resettlement unit and talk to the staff about the excellent work that they have been doing? What voluntary services will take on the work of that unit. when others in the west of Scotland say that at present they could not take on its role? Rather than simply extending the consultation period, will he make it clear that the Bishopbriggs resettlement unit will he kept open?

Mr. Newton: The purpose of the consultation period—the consultations involve some distinguished people, including the former chairman of the Supplementary Benefits Commission and representatives of the Scottish Council for the Single Homeless—is to establish what the possibilities are for alternative provision. I shall bear in mind the hon. Gentleman's request for me to visit the unit. I am due to visit some resettlement units in the next few months, though I cannot make him an absolute promise to visit that one.

Limited List Prescribing

Mr. Latham: asked the Secretary of State for Social Services what progress is being made in setting up the review committee on the selected list of National Health Services drugs.

Mr. Kenneth Clarke: We announced details of the advisory committee on NHS drugs on 12 July. The committee's first meeting is to be held on 23 July.

Mr. Latham: As the doctors do not want a personal appeal system, may we now be assured that the new review committee will get on quickly with the job of reviewing the list, because there seem to be about a dozen drugs which doctors and patients believe should be restored to the list as soon as possible?

Mr. Clarke: I assure my hon. Friend that we shall ask the committee to get on with its task as quickly as possible. I cannot guarantee that it will admit to the list all the drugs to which my hon. Friend referred. There are genuine divisions of clinical opinion, and all of those that have been excluded so far have been excluded on the unanimous opinion of a group of experts who said that there was no scientific or medical need for them.

Mr. Park: Is the right hon. and learned Gentleman still prepared to consider specific cases where a medication is seen by the medical profession to be the only one?

Mr. Clarke: There are no drugs seen by the medical profession to be the only available drugs and which have been excluded from the NHS. We still get some individual complaints, but, as I say, the best advice that we could gather was that there was no medical or scientific need for the drugs that are now excluded. However, the new committee will look at individual products, at the request of doctors and manufacturers, and consider whether anything should be restored to the NHS list.

Dame Jill Knight: Why does my right hon. and learned Friend think that the BMA refused the appeal machinery offered by the Government? Could it have been because of the minuscule number of complaints about drugs that had been received?

Mr. Clarke: It would not be wise for me to try to speak on behalf of the BMA on all these matters. There was a division of opinion before it was decided to decline the offer that we made. I agree with my hon. Friend that the number of difficulties turned out to be remarkably small and that many doctors no longer perceived a need for the individual appeal mechanism about which we were once talking.

Mr. Howard: Will my right hon. and learned Friend ensure that the drug Mucodyne is drawn to the attention of the review body at the earliest possible opportunity?

Mr. Clarke: It will be considered by the committee at its first meeting.

Drug Misuse

Mr. Evennett: asked the Secretary of State for Social Services whether he is yet in a position to formulate a national policy for the prevention of drug misuse.

Mr. Fowler: Prevention is one of the key elements in the Government's overall strategy for dealing with this problem. We set out our policies in the document "Tackling Drug Misuse", which was published last March.

Mr. Evennett: I thank my right hon. Friend for his comments and congratulate him on his efforts in this difficult matter. Will he consider directing more attention towards educating parents and teachers about the problems of drug misuse, so that those problems can be detected at an early stage?

Mr. Fowler: Both aspects are important. We have instituted an advertising campaign, and the Department of Education and Science is also taking action. One of the aims of both campaigns is to give more information to parents and teachers.

Mr. Kirkwood: Has the Secretary of State had time yet to study the report on this important and vexed question

by the Select Committee on Social Services, which was published on 20 June? Will the right hon. Gentleman give us an assurance that, in view of the public disquiet about the escalating problems of drug abuse, he will expedite the Government's response to the report and proceed to implement some of its conclusions?

Mr. Fowler: We shall give urgent attention to that report. I share the concern of the hon. Gentleman and the Select Committee about the problem.

Mr. Harris: Does my right hon. Friend agree that his task and that of his ministerial colleague in the Home Office with responsibility for warning people about the misuse of drugs is made more difficult by certain books, especially one by Harold Robbins called "Descent from Xanadu" which glamorises drug taking among tycoons? I do not ask my right hon. Friend to read this trash; I simply draw his attention to it.

Mr. Fowler: I am sure that the whole House deplores any publication that seeks to glamorise drug taking.

Mr. Dobson: Has the Secretary of State read his Department's report entitled, "Drug Misuse: Prevalence and Service Provision"? If so, does he agree that he is bound to conclude that there is much more "prevalence" than "service provision" and that fewer than a quarter of the district health authorities have received any help from his Government to set up rehabilitation clinics?

Mr. Fowler: We are rapidly expanding the rehabilitation units. Spending has increased to £11·5 million—almost double. The hon. Gentleman may want to claim that more needs to be done. I agree, but I hope he will recognise the initiatives which the Government have taken to deal with this serious problem.

Mental Health Act 1983

Mr. Proctor: asked the Secretary of State for Social Services if he will make a further statement on progress in implementing the Mental Health Act 1983.

Mr. Kenneth Clarke: Implementation of the Mental Health Act is continuing satisfactorily.

Mr. Proctor: Is my right hon. and learned Friend aware that people involved in mental health matters are concerned that the Central Council for Education and Training in Social Work is adopting a negative attitude towards the training of approved social workers under the Act? Is he confident that there will be sufficient approved social workers to fulfill the functions of the Act later in the year?

Mr. Clarke: With respect, I think that my hon. Friend's criticisms should be directed not at CCETSW but at WALCO, which is still continuing the ridiculous boycott of the courses that had been arranged for approved mental health workers. I hope that the union will soon end its unhelpful attitude. It is rejecting a policy that had all-party support and preventing the building up of a cadre of professionally trained people.

Mr. Eastham: Does the Mental Health Act 1983 contain provisions covering people serving in prisons? At Strangeways prison 12 prisoners are designated as mentally ill. When I visited the prison last Friday, I heard of one prisoner who was partially sighted and mentally inadequate and on remand on a charge involving about £6. It is costing about £250 a week to keep him in prison.

Mr. Clarke: We are desperately anxious to end this problem of people in prison who are mentally ill and require treatment. I am glad that their numbers are decreasing. This is however, a long-standing problem. New powers have been brought into effect whereby prisoners can be remanded to mental hospitals for reports. That, I hope, has helped to alleviate some of the problems. I am sorry that it has not been used in the case to which the hon. Gentleman referred.

Children in Care

Mr. Corbyn: asked the Secretary of State for Social Services what plans he has to seek to reduce the need to receive children into care.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. John Patten): We support the growing emphasis on preventive measures and policies in child care. Indeed, the number of children in local authority care has been decreasing. It is for local authorities to provide services for children in need, whether to keep them with their families or, in the interests of the children, to provide alternative arrangements for their care.

Mr. Corbyn: Is the Minister aware that every year 500 children are received into care by local authority social service departments because of homelessness? Will he accept that the policy of selling council houses and cutting back on the construction of new council houses makes this problem far worse, and is likely to increase the number of children taken into care due to homelessness? Does he not think that he ought to give the House a statement on what he intends to do to improve the housing stock of the worst-off people in the country, so that children are not brought into care?

Mr. Speaker: Order. I think that that is well beyond the Minister's responsibilities.

Mr. Patten: As you say, Mr. Speaker, it is well beyond my responsibilities. I recognise the hon. Gentleman's views about homelessness, because in Islington there is a considerable amount of homelessness. I also recognise that in Islington there are a considerable number of children in care. However, the numbers of children in care have been decreasing nationally. Most children go into care for a range of reasons. Homelessness might be one of the reasons that cause children to go into care.

Mr. Hayes: Despite welcome modifications in the law brought in by my hon. Friend, does he accept that there is still a long way to go to achieve a balance between, on the one hand, of protecting the child who needs protection, and on the other of looking after the interests and rights of the parents?

Mr. Patten: It is a difficult balance to strike, and social workers have a difficult job in trying to strike that balance. I pay tribute to the work they do. In any case where a child is placed into care, it is the welfare of the child that has to be paramount, and the future of the child that has to be considered above all else.

Ms. Harman: Does the Minister recognise that children in care are largely the children of the poor, and that high levels of unemployment, his Government's policies of undermining wages councils and planned cuts in benefits—which mean that more families will not be

able to make ends meet—will result in more children being split apart from their families and having to be fostered, adopted or put into children's homes? Is this not the very opposite of being the party of the family, in that the Government are providing for the splitting apart of families?

Mr. Patten: Once again some of the hon. Lady's questions go beyond my departmental responsibilities. The numbers of children in care are reducing. Those who look after children in care have a responsible and difficult job. That is why I hope that the hon. Lady, who has been uncharacteristically silent for some time about problems affecting children's homes in her constituency in the London borough of Southwark, will back me at the meeting of the London borough of Southwark's full council tomorrow in a call for a full investigation of all homes over which doubts have been cast.

Homeless Families

Mr. Nicholas Brown: asked the Secretary of State for Social Services when he last visited a bed-and-breakfast establishment used for homeless families.

The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): In recent months I have visited a number of board and lodging establishments catering for single people and for families.

Mr. Brown: Will the Minister come and visit the people who are living in tents opposite the metro station by the Newcastle Haymarket, and will he explain to them the Government's response to the report of the British Association of Social Workers "Housing in social work", which sets out the fact that it costs the Government twice as much to provide bed-and-breakfast accommodation as it would cost the state to provide decent council housing?

Mr. Whitney: I shall happily look at any particular problems in Newcastle that the hon. Gentleman wishes to bring to my attention, but I hope he will understand that the measures we have taken are a sensible use of the social security budget.

Mr. Fallon: Is my hon. Friend aware that on Tyneside alone there are 5,500 empty council houses, a quarter of which have been empty for more than a year? Will he consider telling these hypocritical Labour councils to allow homeless couples homesteading rights on any council houses that are empty?

Mr. Whitney: I take note of the important point that my hon. Friend makes, but, of course, he is taking me into realms beyond my responsibilities.

Mr. Conlan: When will the Minister stop the rip-off imposed on public funds by the owners of these so-called bed-and-breakfast establishments?

Mr. Whitney: I welcome the hon. Gentleman's support for the measures introduced by my right hon. Friend some months ago.

Mr. Holt: While my hon. Friend is looking at Newcastle, will he also look at the fact that that city has banned the use of Noddy and Babar the Elephant books because of the racist overtones?

Mr. Speaker: I do not know whether that has anything to do with bed and breakfast.

Hon. Members: Answer.

Mr. Speaker: Order. I, too, was confused. It may have something to do with bed, but nothing to do with breakfast.

Mr. Meacher: On a more relevant point, is the Minister aware that in a study undertaken by the citizens advice bureaux into board and lodging restrictions affecting young unemployed persons in Stoke it was found that in two thirds of cases return to the parental household was impossible because of divorce, sexual abuse or parental refusal, and that in another one fifth of cases the DHSS was apparently quite unaware of grounds for exemption? Does that not show how utterly unjust these regulations are? When will the Government accept that the real answer to this problem is not to force young people into wandering round the country like nomads, but to restart the housebuilding programme and to provide adequate rented accommodation in the public sector?

Mr. Whitney: As the hon. Gentleman knows, our original proposals established very important exemption categories, and local DHSS officers are under clear instructions to make those exemption categories widely known. The studies that we have had so far, and the feedback from local social security offices, suggests that the regulations now in place are effective and helpful.

Ambulance Services, Merseyside

Mr. Parry: asked the Secretary of State for Social Services what representations he has received concerning cuts in ambulance services on Merseyside; and if he will make a statement.

Mr. John Patten: We have received no such representations. The Mersey regional health authority has consulted widely on proposals to reorganise the emergency service provided by the metropolitan ambulance service. The proposals were drawn up following a study on accident and emergency cover in the Mersey metropolitan area.
We cannot comment at this stage on the likely outcome of local consultation, which will not be completed until 31 July. Hon. Members whose constituencies lie in the metropolitan area were sent copies of the consultation document.

Mr. Parry: The Minister will be aware of early-day motion No. 771, which has been supported by 38 hon. Members. I have received representation from the public, patients and NUPE, who are objecting to the reduction of five ambulances in a fleet of 30. Will the Minister have words with the regional health authority, given the possibility of a catastrophe in Liverpool, when lives and limbs could be at stake? Will he make sure that essential services in the city are maintained?

Mr. Patten: I am, of course, aware of the early-day motion, and I shall pass the hon. Gentleman's comments on to the chairman of the regional health authority, Mr. Don Wilson. However, I understand that the proposals involve no loss of service and no loss of jobs. I also understand that the ambulance service in Merseyside is an expanding service, with an 8 per cent. growth in jobs over the past eight years and a further 10 per cent. growth in the next decade.

Unemployed Persons

Mr. Cohen: asked the Secretary of State for Social Services whether he estimates that the relative financial position of the unemployed will improve in the two years after the implementation of the social security review.

Mr. Newton: A firm estimate of the effects cannot be made until benefit rates are set within any new structure of social security benefits which may be settled following the current consultation on the Green Paper proposals.

Mr. Cohen: Is not the Minister's answer a cover-up of the truth? Will not the financial position of the unemployed drastically deteriorate after the implementation of the review, as a result of which the unemployed will be impoverished? Is not the Government's message to the unemployed and those who become unemployed that they will be made financially and socially insecure?

Mr. Newton: All that the hon. Gentleman has done is to convey the impression that he has not even read the Green Paper. One of the major causes of concern has been the position of families with children, whether unemployed or in low-paid work. It is clear from the Green Paper that that is a group to which the Government wish to give greater emphasis.

Mr. McCrindle: In any consideration of the effect on the unemployed of the proposals in the social security reviews, is it not wise to take into account the fact that encouraging people who may be discouraged at the moment from taking a job is a positive step in the interests of those who are unemployed?

Mr. Newton: That is correct, and the effect on both the poverty and unemployment traps, especially the latter, is one of the major advantages of our structural proposals, as is the improved earnings rule for those who have been out of work for a long time.

Mrs. Beckett: Is the Minister aware that those who lose service through unemployment will be most disadvantaged by the abolition of SERPS? Does he recall that when the Secretary of State announced that abolition he told the House that it was the result of unexpected and unforeseen developments and that those developments had come to light during the reviews? In the light of the statement in the last few days that these matters were not discussed, and in the light of the Government Actuary's statement that costs were not unforeseen and that what has changed is the Government's willingness to meet the costs, will the Minister now tell us whether his right hon. Friend intends to apologise to the House? [Interruption.] Further, will he tell us the real reason for the abolition?

Mr. Newton: I am in some difficulty about replying to the hon. Lady, because I heard only about half the question. I can say, however, that it is quite clear from the additional analysis, including work relating to the 1981 census carried out for the review, that the prospective cost of SERPS is significantly greater than was fully appreciated by those who made the decisions at the time.

Mr. Favell: Will my right hon. Friend bear in mind that many people take low-paid employment out of a sense of pride? They find it enormously difficult to make ends meet.

Mr. Newton: Yes. Not the least of the failures of our social security system is that we have put many people in


low-paid work in the intolerable position of knowing they would be better off out of work. We intend to put a stop to that.

Mr. Meacher: Is the Minister aware that all the cuts, as opposed to the restructuring in the Green Paper, the abolition of SERPS, the requirement on the poorest families to pay at least 20 per cent. of their rates, the removal of mortgage interest payment relief from those on the dole for the first six months, were not recommended by the review committees and imposed only on the personal decision of the Secretary of State? What other decisions, what other cuts, did he impose which were not recommended by his own review committees? Will he now publish all the review committee reports so that we can judge how much he has deviated from his own advisory review committees to impose cuts?

Mr. Newton: It was made absolutely clear throughout that the Government would be taking decisions and putting forward proposals as Government decisions after taking account of the work of the various teams which were set up. What I would like to know from the hon. Gentleman is when we shall know whether his proposals about mortgage interest are the policies of the Leader of the Oppostion and the Labour Party.

Limited List Prescribing

Mr. Meadowcroft: asked the Secretary of State for Social Services if he has yet received the reply of the British Medical Association to his proposals for an appeals procedure on the limited list.

Mr. Kenneth Clarke: Yes, Sir. The general medical services committee of the British Medical Association has now formally declined our proposals for a local appeal mechanism for the selected list of drugs.

Mr. Meadowcroft: Would support from general practitioners wishing to implement such an appeal system be sufficient for the Minister to implement it for them unilaterally?

Mr. Kenneth Clarke: It would be very difficult to implement a scheme without the co-operation of the people who originally asked for it. We have gone through the process of having this mechanism asked for by the BMA. We then negotiated with BMA representatives to their satisfaction. Eventually, our proposal was rejected by the conference of local medical committees. As I said earlier to my hon. Friend the Member for Birmingham, Edgbaston (Dame J. Knight), what has happened is that, in practice, the need for such a mechanism has turned out to be insufficient.

Dr. Mawhinney: Does my right hon. and learned Friend agree that that is an unacceptable decision by the medical profession? Bearing in mind that he regarded such an appeal mechanism as important for patients when he established the system, will he pursue the proposal, preferably with the help of the medical profession? If that is not possible, will he seek some other way to set up such a mechanism?

Mr. Clarke: The decision was taken on the advice of the conference of local medical committees, a body fairly representative of general practitioners. The history of the matter is that the mechanism was called for before we introduced the selected list system, when there were

exaggerated fears about the likely effect on patients. In practice, the need for such a mechanism has diminished and we are getting along well without it, but if the BMA or the medical profession changes its mind we shall, of course, consider the matter again.

Dr. M. S. Miller: Why does the right hon. and learned Gentleman not go straight to the general practitioners themselves? He does not need to have the support of every GP, but if a sufficient number will follow the scheme they will be able to carry out their main purpose of pursuing the best interests of their patients. Why does he not go straight to the GPs and let them work the scheme?

Mr. Clarke: With respect to the hon. Gentleman, who has been a general practitioner, I do not think that a sufficient number of GPs are challenging the decision of their own local medical committees. The present system is working reasonably well, and now that we have set up a new review committee to keep the list up to date it is unlikely that there will be any major difficulties in practice.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Holt: asked the Prime Minister if she will list her official engagements for Tuesday 16 July.

The Prime Minister (Mrs. Margaret Thatcher): This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today. This evening I hope to have an audience of Her Majesty the Queen.

Mr. Holt: Does my right bon. Friend agree that, apart from the lunatic fringe on the Opposition Benches, the vast majority of people in this country and in the world will be heartened by her strong and robust words yesterday on the subject of terrorism? Will she re-emphasise those words today and at every opportunity, especially to the justices of this country and to others responsible for sentencing policy, so that not only terrorists but all who are involved in vicious crime are brought to book and receive long sentences?

The Prime Minister: I am grateful to my hon. Friend. I believe that most people share the views that I put across on the need for maximum co-operation between countries on terrorism and the need for very severe sentences of imprisonment for those convicted of crimes of violence.

Mr. Roy Jenkins: What does the Prime Minister intend to do to prevent a repetition of the disastrous effect of the exchange rate on British industry in 1981?

The Prime Minister: I have no reason to think that the present exchange rate is adverse to British industry. As the right hon. Gentleman knows, when the pound is higher against the dollar we can get raw materials and semi-fabricated components at a lower price. When the pound is lower against the dollar exports become more competitive, but it is not advisable to rely on the exchange rate for competitiveness.

Mr. Cowans: Will the Prime Minister take time out to visit Trinity House and take the Secretary of State for Transport with her—even if he has to be taken or t a lead—and discuss the efforts being made by Trinity


House to have lighthouse tender ships built in this country? Is she aware that she is being asked merely to match the offer and to repay the efforts of the shipbuilders on Tyneside who built the Endeavour for the Falklands campaign as well as the Ark Royal, but who for their pains now see ships for Britain being built in Korea? Will she show some compassion? Will she show the kind of woman she is and repay the people who work for us? They are British.

The Prime Minister: The hon. Gentleman is aware that the gap between the price quoted in Korea and that quoted by British Shipbuilders was too great to be bridged by subsidies under the intervention system. The hon. Gentleman knows that we subsidise the business, but if we are to get business we must be able to match competitiveness and efficiency.

Mr. Nicholas Winterton: asked the Prime Minister if she will list her official engagements for Tuesday 16 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mr. Winterton: Does my right hon. Friend agree that a substantial reduction in interest rates would be much to the advantage of British industry and therefore outweigh any disadvantage to the value of the pound? Will she therefore have a word with the Bank of England and get the British banking system to act in the interests of manufacturing industry in the United Kingdom?

The Prime Minister: Many interests have to be considered in the determination of interest rates. My hon. Friend is aware that, when the value of the pound went down seriously, that was extremely damaging to the reputation of Britain, to British industry and bad for inflation. My hon. Friend is aware that we shall keep interest rates at whatever level is needed to maintain downward pressure on inflation, but no higher than that.

Mr. Kinnock: May I join the Prime Minister in her praise for the performers and contributors to Live Aid? As she said, it was humanity in action. By the same token, is it not inhumanity in action when a Government cut 18 per cent. off an aid budget in real terms in five years, when that same Government reduce the aid budget by 3 per cent. in real terms—£40 million just in this year—and when that Government, despite the emergency in Sudan and Ethiopia during the past two years, have not added one penny to the aid budget, except for the Hercules services, which they are now thinking of withdrawing? With a record such as that, what price the brotherhood of man?

The Prime Minister: The right hon. Gentleman is comparing the taxpayers' aid with voluntary aid. There has always been a place for voluntary aid. Voluntary services have done a great deal. For example. Christian Aid, Oxfam, War on Want and Save the Children have always been extremely active in this area and the new Live Aid was an extremely welcome addition. As for what we have done for Ethiopia and Sudan, in 1984 we provided £266 million, of which £248 million went to sub-Saharan countries, including £234 million for long-term development. In the year to March 1985 we spent £95 million on famine relief operations in Africa. This year we expect to spend at least £60 million. As the right hon. Gentleman is aware, my right hon. Friend the Minister for Overseas

Development is now in Ethiopia and considering the needs for future months, especially the need to keep going with the Hercules.

Mr. Kinnock: I am more than prepared to compare Government aid—taxpayers' aid—with the charitable contributions made freely by people in Britain. When I do, I see that in the past year, a year in which the Government took £40 million off aid, the people were prepared to subscribe £67 million in aid—[HON. MEMBERS: "What is wrong with that?"] Well, why do we not have it all together, public and private? I also see that the Government have cut an amount equivalent to 10 times that which has been subscibed in the wake of the Live Aid concert. In any case, is the Prime Minister not ashamed of the fact—[HON. MEMBERS: "No."]—that the only way in which she is prepared to provide short-term aid to the starving is by robbing the hungry of the world as she shuffles round the aid budget? Will she do three things? First, will she reverse this disastrous and cruel cut in aid policy? Secondly, will she make a contribution—[Interruption.] I can understand the irritation, embarrassment and shame of Conservative Members. Secondly, will she make a contribution to the international food and agricultural development fund, which helps poor farmers in Africa? Thirdly, will she give us a guarantee now that the essential Hercules service will continue—and not be withdrawn—for as long at the need for it exists in Ethiopia?

The Prime Minister: First, as the right hon. Gentleman knows, the majority of general aid is spent on capital long-term projects of the sort that he proposes should take place, that is on the development of food resources in Africa. Secondly, I am extremely proud of the Government's record on aid to Ethiopia and the Sudan. We were the first to respond, and that is what the right hon. Gentleman cannot stand. As he knows, within the aid budget there is always a certain amount both for disaster and famine relief and for contingencies. The right hon. Gentleman is well aware that the Government were the first to respond to the need in Ethiopia, and quick to respond in Sudan. We were the first to respond to the need for transport to take food to its destination. Yesterday, in response to a serious shortage of transport, my right hon. Friend the Minister for Overseas Development announced further assistance of £2 million to help with the purchase of transport.

Mr. Steen: Will my right hon. Friend seek time this afternoon to drop a congratulatory note to Bob Geldhardt—[Interruption.]

Mr. Speaker: Order. Interruptions take up the time of the House.

Mr. Steen: Will my right hon. Friend seek time this afternoon to drop a congratulatory note to Bob Geldof—[Interruption.]—and will she thank him for raising £50 million to be sent to Ethiopia? Will she remind him that young people, far from being hooligans on the football terraces, are as compassionate and caring as any people in the world?

The Prime Minister: Obviously, I sent a letter to Mr. Geldof before the concert congratulating him on the idea. We are all delighted that it had such a magnificent result.


We congratulate him not only on the result, but on the leadership that he gave to young people and to humanity everywhere.

Mr. Cohen: asked the Prime Minister if she will list her official engagements for Tuesday 16 July.

The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.

Mr. Cohen: Will the Prime Minister condemn the monstrous murder in Ilford of Mrs. Kassam, who was eight months pregnant, and her three children in what was almost certainly a racial attack? Does that not highlight the need for tougher laws against racial attacks and harassment, such as I shall introduce tomorrow? Will the Prime Minister give a pledge to introduce such legislation at the earliest opportunity and to end her Government's failure to act in the face of an increase in racial attacks?

The Prime Minister: I am not yet convinced that we need any changes in the law. It would be premature to embark on legislation before the Home Office has received the Commission for Racial Equality's proposals for amending the Race Relations Act 1976 following its review of that legislation. One wholly and utterly condemns that terrible attack, which had such terrible consequences for the Kassam family.

Mrs. McCurley: asked the Prime Minister if she will list her official engagements for Tuesday 16 July.

The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.

Mrs. McCurley: In the light of the optimistic economic forecast made today by the chairman of the British Steel Corporation, will my right hon. Friend comment on the future of Ravenscraig and on the fact that those on the Left who are the most vociferous in howling for its retention were the ones who were prepared to make it the sacrificial baa lamb during the miners' strike?

The Prime Minister: My hon. Friend is correct. The results announced by the British Steel Corporation are the

best for 10 years, although the steel industry lost £180 million because of the miners' strike. But for the effect of the strike on steel, it would have been in profit to the extent of about £40 million. It is an extremely good result. I agree with my hon. Friend about Ravenscraig. The people who work there struggled nobly and successfully to keep it going. Those who are now pleading for more for Ravenscraig are the very people who were anxious to close it during last year's coal strike.

Mr. Dormand: Will the Prime Minister give some thought today and, indeed, every day, to the plight of the long-term unemployed? Will she examine some of the studies that have been made of people who have been without work for a long time, to see the devastating effects of long-term unemployment? Does she sometimes have qualms of conscience about the catastrophic effect of long-term unemployment on families? Is it not the biggest single indictment of her economic policies?

The Prime Minister: It is because we are so very much aware of the catastrophic effect of long-term unemployment on the morale of people and their families that, in the Budget, my right hon. Friend the Chancellor announced nearly a doubling of the community programme and a substantial increase in jobs so that the long-term unemployed can have a chance of a worthwhile job after their periods of unemployment. Perhaps the hon. Gentleman has seen a document from Europe, published today, which shows that the numbers in employment in Europe are increasing, and that the increase in jobs in Britain during the past year is greater than that in all the other European countries put together.

Mr. Golding: On a point of order, Mr. Speaker, arising out of questions. Can you ask the Government Whips whether, when they are planting out, they could choose more fertile ground and occasionally water the plants?

Mr. Speaker: I have no responsibility for the Whips.

"Lifting the Burden"

The Financial Secretary to the Treasury (Mr. John Moore): I wish to make a statement on the White Paper "Lifting the Burden".
One of the major objectives of this Government is to make sure that the right conditions exist for enterprise to flourish. This is essential for the creation of jobs and wealth. The country needs more jobs and we need more wealth to pay for all the socially desirable things we expect to be provided—such as pensions, the Health Service and education.
For far too long, successive Governments—albeit with good intentions—have tended to stifle much-needed enterprise with restriction and regulation. Today, we are publishing a White Paper called "Lifting the Burden", which sets out to put that situation right.
As the House will recall, in March of this year, my right hon. Friend the Secretary of State for Trade and Industry published a report entitled "Burdens on Business". This showed that Government requirements constitute a major drain on business—particularly small business—in terms of direct cost and of management time.
"Lifting the Burden" is the result of the Government's consideration of the recommendations in that report and of looking more widely at the scope for change. It also reflects the widespread representations on the report which the Government have received.
The White Paper is the first major step in a continuing programme of removing unnecessary regulations. It refers to about 80 measures covering a wide range of initiatives in a number of areas, including planning, tax and social security, employment protection, and trade and industry—some of which have already been undertaken and some of which are for the future. Each is designed to allow firms to divert scarce resources away from complying with bureaucratic requirements and towards developing and expanding their business.
This is but the beginning of the process, for one of the most important elements in the White Paper is the setting up of a new system within Government to assess proposed and existing regulations from the point of view of the burden the may impose on business. The primary responsibility for this must be within the appropriate Department, but a Central Task Force is being set up, within the Enterprise Unit in the Cabinet Office, to assist Departments in their consideration of how the burden on business of regulations can be minimised.
I should emphasise to the House that we are not seeking to remove all regulations. Essential protection for workers, consumers and the general public must be maintained. And we must protect our quality of life. The Government have sought to strike the right balance between liberty and licence. The White Paper adopts a balanced approach. It represents a major step forward in giving businesses the freedom to flourish and grow. I commend it to the attention of the House.

Mr. Tony Blair: It is obviously not possible to give a detailed response at this stage, but we hope that there will be a full debate on the White Paper in due course. In general terms, we would, of course, support the abolition of unnecessary bureaucracy in the interests of small businesses, but the test that will be

applied to the White Paper is whether it deals with the real problems of the economy and unemployment or whether it is just another Government gimmick designed to distract attention, and in particular whether we are talking about cutting unnecessary bureaucracy or about subordinating vital protections for the consumers and employees in the interests of ideological obsession with deregulation.
Turning to the substance of the White Paper, why do the Government identify the one major problem of regulation and then proceed to deal only with the minor ones? Is it not the case that the only area of regulation mentioned by more than one in five of the Department's own survey was value added tax? Is not that the main problem faced by small businesses? Is it not correct that the White Paper proposes no new action of any substance on that? Why, in particular, did the Government block Opposition amendments to the Finance Bill that would have eased the bad debt relief on small firms?
Secondly, will the Minister undertake that there will be no less environmental protection from the changes in planning procedure? Will he tell us why they are given such prominence when only a minute percentage of his survey said that they were a major factor?
Thirdly, any loss of standards—and I think there may be—in fire regulations or health and safety regulations would be a wholly unacceptable and wrong price to pay. How on earth can it be right for the Government to impose different rights and duties in regard to safety for the public and employees based on the size of the firm? Is the Minister saying that the risk of mishap is less with small businesses? If so, may I tell him that all the evidence indicates the contrary, and that small businesses give rise to the most safety risks?
We shall oppose vigorously the suggestions about unfair dismissal law and wages councils. What philosophy is it that says that fair play and fair rights of employment are a constraint on proper business activity?
Many of the proposals seem to have been derived not from business experience but from political doctrine. Why is it that the scrutiny which gave rise to the White Paper received views from the organisations representing employers but not from a single organisation representing employees? Why were the Institute of Directors and the Adam Smith Institute so closely involved with the proposal? Is it not the case, as the survey itself found, that
most small businesses see problems with finance and sales as more serious than problems with compliance costs"?
The same survey said:
The main reasons for business being good are individual effort and good demand.
If those are the main problems, why have not the Government dealt with them? Why create an agency to cut red tape but not agencies for industrial development? Why do we end planning protections but cut back on local authority initiatives which would create more jobs? Why do we cut back on unfair dismissal but not give proper training in the face of skill shortage? Why do we worry about the cost of meeting health and safety regulations but decline to lower interest rates?
At first blush, the White Paper is a shabby and irrelevant document from a Government whose ideology is unable to solve the real problems of our economy. Will a single job be created by the scheme? If not, of what use is it?

Mr. Moore: The hon. Member for Sedgefield (Mr. Blair), who spoke from the Opposition Front Bench, has


clearly not benefited from the opportunity to read the White Paper. I accept arid understand that we have had rhetoric and dogma in the extreme as opposed to the Government's attempt to respond to the "Burdens on Business" study, which sought to ask business what would be helpful in improving opportunities for employment—

Mr. Andrew Faulds: Shocking!

Mr. Moore: It is fascinating that as soon as there is an attempt—

Mr. Faulds: Tatty!

Mr. Moore: The patience of the Government is as long, if not longer, than the time taken by sedentary interruptions from the Opposition Back Benches. As soon as there is a serious attempt by the Government, as there is in this instance, to address many of the problems that business identifies in an endeavour to create jobs, we have ribald cat-calling from the Opposition that does so much harm to the House, and certainly to the Opposition.
The hon. Member for Sedgefield talked of rhetoric. I know that hon. Members generally have not had an opportunity to study the White Paper. I respond to the hon. Gentleman's first point by saying that my right hon. Friend the Leader of the House was present throughout his comments, and I am sure that he will have noted the hon. Gentleman's request for a full debate. Paragraph 1.1 of the White Paper states:
This paper is about one important aspect of helping enterprise to grow—by reducing burdens imposed on business by administrative and legislative regulations.
The White Paper is related specifically to that.
The hon. Member for Sedgefield spoke about VAT. The Government, through the Budget and in considering the Finance Bill in Committee, have relieved a substantial burden of bad debt by introducing £25 million worth of relief. I am surprised that the hon. Gentleman, who I imagine speaks with some knowledge of industry and business, is not aware of the degree to which planning procedures have inhibited the growth and development of jobs. The matters to which the White Paper addresses itself in pages 10 to 16 are critical.
The hon. Member for Sedgefield asked about health and safety. Those of my hon. Friends who have not had the opportunity to read the White Paper in detail will be reassured—the hon. Gentleman made an assertion which, if true, would be difficult to argue with—by paragraph 5.6 on page 22 of the White Paper. The last sentence states:
The Government are committed to maintaining necessary protection and have no intention of down-grading health &amp; safety standards either generally or in relation to small firms.
The hon. Gentleman's next question was directed specifically to jobs. I refer to paragraph 1.16 on page 4 of the White Paper. Research Associates examined 200 businesses as part of the "Burdens on Business" report. It was clear that there was a cumulative job loss of 200 within that net of 200 firms. That might be an indication of the burden that has been carried by the 1·6 million businesses in Britain and the job losses within them. It is clear from business surveys that jobs are lost in consequence of regulations. It is clear also that the removal of the regulations is a major first step in the Government's attempt to help in this area.

Sir Peter Hordern: If it is necessary for the Government to take 80 separate measures to help small

businesses, it is a wonder that they have been able to survive at all. I congratulate my hon. Friend the Minister on bringing, belatedly, these measures into existence. Is there anything in them that will raise the level at which VAT is to be paid and the level at which corporation tax is to be paid by small businesses? Is anything to be done about the wages councils?

Mr. Moore: I thank my hon. Friend for his comments. The White Paper relates to business as a whole, not just to small businesses, which are especially burdened by regulations and legislation.
I should have responded to one of the points made by the hon. Member for Sedgefield by drawing attention to the reference to the VAT threshold on page 17 in paragraph 4.2. It states:
This threshold below which firms are exempted from having to charge VAT is the maximum permitted under EC law. The Government believe that Member States should have more flexibility to raise their VAT threshold if they wish. This goal is being pursued through the initiative launched by the Prime Minister at the European Council meeting in March this year.
That is a clear commitment to action which has already been initiated by my right hon. Friend the Prime Minister. There are no references in the White Paper to corporation tax threshold.

Mr. Ron Leighton: Is the Minister aware that the main burden which needs lifting from British industry is the burden of the present Government and their restrictive policies? Is he aw are that it is a complete illusion to think that the current mass unemployment has anything to do with the trivia mentioned in the White Paper, including the attack on the Health and Safety at Work etc. Act 1974? If he believes all this stuff, will he give the House an estimate of how many more jobs will be created as a result of the proposals in the White Paper?

Mr. Moore: I have already tried to illustrate, by referring to page 4 of the White Paper, the problems that business encounters in relation to the inhibition of employment through regulations and legislation. I tried to show how it could be quantified. Hon. Members might like to interest themselves in the White Paper. I appreciate that they have not had time to read it, and I accept that difficulty. However, I hope that when the hon. Gentleman, who is a fair man, reads it he will recognise that, while at other times we may be discussing the Government's fundamental economic policy, here we are discussing an equally important set of policies which relate to the removal of the kind of supply side rigidities that have so inhibited the development of jobs and employment.

Mr. John Browne: Does my hon. Friend accept that all men and women, regardless of party, who believe in freedom and enterprise will welcome the statement as pure music? They will see it as a bold, imaginative and, above all, co-ordinated attempt by the Government to remove bureaucratic burdens from employment. However, will he assure the House that he will introduce measures to ensure that protection is given to the green belt and to ensure the abolition of wages councils?

Mr. Moore: I am not sure that I fit the bill for introducing music, but I am pleased that my hon. Friend noticed the degree of co-ordination represented by the


White Paper. My noble Friend in another place has been responsible for introducing the degree of co-ordination that the Government need. The debate is about the difference between licence and liberty. As my hon. Friend is plainly seriously interested in the issue, I draw his attention to page 10 of the White Paper which is entitled "Planning and Enterprise".
My hon. Friend asked about the green belt. The planning aspects are clearly identified in paragraphs 3·2 and 3·3. They make it clear that
The Government's policy is to simplify the system and improve its efficiency … An efficient and simple system can speed the planning process and facilitate much needed development which helps create jobs—in construction, in commerce and industry, and in small firms.
The White Paper then makes this important point:
The Government is equally concerned to protect"—
[Interruption.] This may not be important to Opposition Members, but I know that it is important to people outside the House—
and enhance the environment in town and country, to preserve our heritage of historic buildings and rural landscape, to conserve good agricultural land and maintain the green belts.
I am sure that that statement is welcome.

Mr. George Park: Does the Minister realise that the greatest service the Government could render industry would be to ensure that the terms of trade between this country and other countries are fair and equal? Why does he not propose to do something about discriminatory tariffs and the differences in fuel and energy costs? Why does he continue to levy on motor vehicles a tax which is not applied to any other commodity in this country? Those are some of the measures that would lift the burdens from industry.

Mr. Moore: The hon. Gentleman is making legitimate points about questions that are probably better addressed at other times. He will be particularly interested in page 29 of the White Paper, which illustrates the actions that my right hon. Friend the Prime Minister and others are leading within the European Community to try to ensure that the regulatory burden that emanates from Europe, as well as that from within the country, is reduced.

Sir Reginald Eyre: Is my hon. Friend aware that, despite the surprisingly ill-informed reaction of Labour Members, the White Paper's approach is very much to be welcomed, particularly the proposals relating to the simplified planning zones? These could be helpful in contributing to the solution of the problems of the inner city areas, and would help to attract developments into those areas, where unemployment is worse. When will legislation be introduced on this? Will my hon. Friend assure the House that in the meantime he will encourage local authorities to prepare their plans and to make applications for this beneficial form of zoning?

Mr. Moore: I appreciate my hon. Friend's remarks. I know his long experience in this sector and I enormously respect the expertise that he brings to bear. I no longer express surprise at Labour Members' reactions. I know that my hon. Friend will be particularly pleased to study with care page 11 of the White Paper which, in paragraph 3.6 (i), goes into considerable details about the important—[Interruption.] Labour Members may be unaware, until they go back to their constituencies, of the

importance of simplified planning zones. They will find that it arouses considerable interest in their local authorities.
I know that my hon. Friend the Member for Birmingham, Hall Green (Sir R. Eyre), with his considerable experience, will particularly appreciate what is said in the section on simplified planning zones in the White Paper. The White Paper says:
It is proposed to introduce new legislation".
I hope that that will be very soon.

Mr. Paddy Ashdown: As the Minister will know, the alliance has supported the Government's attempts to try to lift the burdens on small businesses where those are sensible and responsible. Therefore, we welcome the general direction of the White Paper, even though it appears at first sight to be somewhat long on rhetoric and short on specific measures.
I have three questions. First, would not a full day's debate on this matter be useful? Secondly, would it not be highly inappropriate to shift the burdens from the small business men if they were to be shifted to small business employees, resulting in extra exploitation and reduced conditions of work? Thirdly, will the members of the Central Task Force include representatives of both small businesses and small business employees?

Mr. Moore: I unreservedly thank the hon. Gentleman for welcoming the basic thrust of the White Paper. I find his welcome a little jaundiced by his suggestion that it is long on rhetoric. We have not had to conspire with the hon. Gentleman's party in this and he will find on closer examination that there are many specific details.
I cannot comment further than I have already about the possibility of a debate. That is up to my right hon. Friend the Leader of the House, who is still here and has heard the hon. Gentleman's comments. Because of the excellent material within the White Paper, I can see no reason why the Government would not welcome such a debate.
The hon. Gentleman is right. This is an attempt to shift the burden of regulation and legislation from where it is unnecessary, and from employer and employee alike. We do not intend to shift the burden from one to the other. It is envisaged that the small Central Task Force will have representatives from the outside world, and I am sure that my noble Friend Lord Young will concern himself with ensuring that small business men are included in the brief. I shall make sure that I put the hon. Gentleman's points to my noble Friend.

Mr. Michael Grylls: Is my hon. Friend aware that in the United States the creation of jobs in deregulated industries has been twice as fast as that in other industries? Therefore, the major advance that has been announced today in freeing owner-managed businesses from destructive bureaucracy is very much to be welcomed. Can we expect to receive yearly White Papers to describe progress on the deregulation programme so that the House of Commons may measure how fast we are moving?

Mr. Moore: I thank my hon. Friend for his welcome of the White Paper. I should like to see action flowing from the recommendations rather than a whole series of White Papers. My hon. Friend is right in the major thrust of what he said in relation to the United States. We mention the matter on page 3 of the White Paper. He is right to mention aspects of the way in which deregulation


in the United States has not only enhanced job creation but reduced massively costs to business and industry and to the taxpayer. It has been successful all round.

Mr. Harry Ewing: As the name of the Secretary of State for Scotland does not appear on the White Paper, will the Financial Secretary tell the House whether the White Paper relates to Scotland as well? If it does, what is the position in relation to simplified planning zones? Does not the Minister regard it as very dangerous that a private developer will have the right, under the proposals in the White Paper, more or less to ask the Secretary of State to instruct a local authority to proceed with a planning application under the simplified planning zone procedure? Is not that highly dangerous, coming from a House of Commons where so many private developers are represented through the voices of Conservative Members?

Mr. Moore: The hon. Gentleman is right to draw our attention to the different planning position in Scotland. It is referred to in the White Paper. Obviously the hon. Gentleman has not had time to read it, which I appreciate—

Mr. Ewing: I have.

Mr. Moore: I am sorry. I should like to draw the hon. Gentleman's attention to page 10, paragraph 3·5, which states:
The Secretary of State for Scotland is also issuing a new circular on development control priorities and procedures in which these principles will be drawn to the attention of Scottish planning authorities.
I shall draw the hon. Gentleman's additional points to the attention of my right hon. Friend the Secretary of State. I shall be happy to ask him to answer the hon. Gentleman's specific points.

Mr. Anthony Beaumont-Dark: I welcome the White Paper, but can my hon. Friend tell us whether we shall change the accounting procedures with regard to auditing, because many small companies are treated by the Revenue as if they were ICI? Will that be incorporated in the simplification of the whole revenue procedure?

Mr. Moore: There is a study of specific accounting points that are referred to in parts of the White Paper and details in regard to accounting procedures. That study is due to report in the autumn—in September, I think—but most of the detailed improvements relating to accounting are separate from the particular proposals that are likely to be in the taxation Green Paper, which relates to non-cumulation and the possibility of the combination of tax and social security and tax and NIC.

Mr. Tam Dalyell: Will the hon. Gentleman look at page 11, paragraph 3.6(i), which states that local authorities
will also be required to consider proposals for the establishment of SPZs initiated by private developers"?
Does that mean that every local authority will, as a matter of law, have to consider every plan that is put forward by a private developer? That is what it says. Has it occurred to the Government how many staff will be involved and the sheer cost of that? Is not this in fact a private developers' charter?

Mr. Moore: With respect, I draw the hon. Gentleman's attention to the beginning of that paragraph,

which states that new legislation will be introduced. It will be possible at that time to discuss the details that the hon. Gentleman is talking about. The central point is in the next sentence, which says:
This will enable the local planning authority to specify types of development allowed in an area, so that developers cart then carry out development that conforms to the scheme without the need for a planning application and the related fee. Planning permission for other types of development can he applied for in the normal way.
That is the central theme. I know that the hon. Gentleman will wish to address the additional points on the introduction of the legislation.

Mr. Jeremy Hanley: The White Paper clearly shows that the Government agree with the vast majority of people in this country that reducing unemployment is the main social and political priority. Does not my hon. Friend agree that those who seek to preserve the regulations that so often are a disincentive to employment should justify that as a higher priority than increasing employment?

Mr. Moore: Yes, absolutely.

Mr. Dave Nellist: Is it riot a fact that the White Paper will do nothing to lift the burden of mass unemployment from 5 million people in this country—[Interruption.]—but, rather, will increase the rate of exploitation of workers, particularly youngsters, women workers and the 9 million low paid? Is the Minister aware that paragraph 5.10 of the White Paper represents a continuation of the Government's idea that lads and lasses working in hairdressing, on a £33.40 minimum wage, are responsible for the mass unemployment? Where do the Government get the idea that 2·75 million young workers who come under wages councils are responsible for the mass unemployment that we have in Britain?

Mr. Moore: To bring a semblance of reality back to the debate—

Mr. Nellist: Unemployment is real for those without work.

Mr. Moore: —paragraph 5.10 points out, among other things, the unnecessary restrictions that relate to w omen's hours of work. At present, technically, women cannot do more than six hours' overtime and, unless exemption is granted, women cannot work shifts. The proposed legislation will remove those outdated constraints. I should have thought that hon. Members on both sides of the House would welcome the way in which the basic rights of such people are still protected and would welcome the removal of discrimination against women.

Sir William Clark: In view of the fact that between 1980 and 1984 140,000 net new businesses wer set up, does my hon. Friend agree that the lifting of burdens is bound to accelerate the rate at which businesses are established? In view of the EEC regulations on VAT, may we have more flexibility in the threshold of £19,500, at any rate for new businesses, even if that means increasing the threshold for new businesses for the first few years of their existence?

Mr. Moore: I welcome my hon. Friend's comments about the generation of new businesses, which is critical to creating employment. I referred earlier to paragraph 4.2, which gives the Government's position on the threshold, and I have taken careful note of my hon. Friend's remarks about the threshold and new businesses.

Mr. D. N. Campbell-Savours: Why do small business men in my constituency always tell me that they do far better under Labour Governments than they do under Conservative Governments? Could it possibly be because the monetary stance of Labour is more helpful to them? Is the Minister aware that his statement will do nothing to deal with the monetary stance of the Conservatives, which is at the heart of the problem?

Mr. Moore: Much as I personally like the hon. Gentleman, I could not for a moment begin to deny what people would say to him, knowing his particularly delightful, aggressive personality.

Sir Dudley Smith: Is my hon. Friend aware that an increasing number of people who have established small businesses in recent years have been looking forward to the day when there would be a bonfire of unnecessary regulations and that they will, therefore, welcome his announcement today? I have not had a chance to read the White Paper. Does it deal with finance? If not, will my hon. Friend have a word with the chairmen of the clearing banks because greater flexibility on their part would go a long way towards encouraging small businesses?

Mr. Moore: My hon. Friend is well informed on these issues. He may not recall that earlier I mentioned the way in which the White Paper referred to one important aspect of helping enterprises to grow—by reducing the burdens imposed on business by administrative and legislative regulations. I am aware that my hon. Friend raises a point about which we hear in other parts of Government, and I shall make sure that the Chancellor and my other colleagues are informed about what he has said.

Mr. Nigel Forman: I welcome the proposals in this comprehensive White Paper, but is my hon. Friend aware that perhaps the most important point to small businesses is the need to raise the VAT threshold? Is he aware how vital it is for us to press that point in the Community and to achieve progress, with a VAT threshold of perhaps £50,000, as soon as possible?

Mr. Moore: My hon. Friend reiterates a point that has been made three times. I am sure that my right hon. and hon. Friends will not only welcome his support for the relevant part of the White Paper but will have heard his comments.

Mr. Dennis Skinner: The Minister should stop trying to pull the wool over people's eyes. Is it not a fact that the Tories' macro-economic policy of the last six years has resulted in more than 100,000 small and larger companies going under, with each year more bankruptcies and company liquidations occurring that in the preceding year? That process has continued throughout the reign of the Tories. How on earth can our problems be solved by the Government simply allocating clever little titles such as "Lifting the Burden" and how can micro solutions conceal the fact that the economic stranglehold of the Tories prevents companies from recovering'?
When will the Minister offer a decent solution—for example, by telling small companies to go to the Governor of the Bank of England and say, "We would like to be treated in the same way as Johnson Matthey. We are a small firm, but we are employing some people. Why cannot we be treated in the same way as the City crooks?"

Why do the Government have double standards—one for the their friends, and one for those whom they are prepared to cast into the gutter?

Mr. Moore: I was waiting eagerly for the subject of Johnson Matthey Bankers to be introduced into this micro debate. The hon. Gentleman will appreciate—because occasionally he tries to embrace facts—that the net increase in the number of small businesses in the past five years has been about 140,000. There has been a net increase at the micro level. He might care to give the House the benefit of his Socialist form of macro-economic policy when we next have a major economic debate. I am sure that that would be fascinating to the country at large.

Mr. Tim Eggar: I welcome the White Paper, which is clearly good for employment. My hon. Friend said that every Department would have to carry out an exercise on compliance costs. May we be assured that the results of that exercise will be published on the face of Bills and regulations? The House as well as Ministers should understand the cost of regulations that are being introduced.

Mr. Moore: I am not sure that publishing all attempts at achieving a more effective cost analysis within Departments with every proposal is necessarily the best way of ensuring that the proposal sees the light of day. However, I shall consider the point that my hon. Friend makes.

Mr. Ian Wrigglesworth: I welcome any effort by the Government to remove burdens on businesses, but is the Minister aware that many people will be puzzled about why it has taken the Government six years to take the initiative that he has announced this afternoon? If he is serious when he says that essential protection for workers, consumers and the general public must be mantained, will he explain how the essential protection for workers will be maintained in view of the proposed changes affecting wages councils, particularly in respect of statutory sick pay and improving industrial tribunal procedures?

Mr. Moore: The answer to that part of the hon. Gentleman's question concerning the time involved is that the Prime Minister, in August of last year, in response to suggestions from the Department of Trade and Industry that there was considerable concern about the pressure of regulations on businesses, set up a committee which reported to the Secretary of State for Trade and Industry in March 1985, and in the three and a half months since that date the White Paper has been produced. I should have thought that, in Government terms, that was very fast indeed.
I feel sure that the hon. Gentleman would wish to address his other questions about wages councils and protection to the Secretary of State for Employment. I urge him to look with care at the section in the White Paper which relates to sickness pay, because the position and rights of workers, as dealt with in the White Paper, are carefully protected while the issue goes for further consultation.

Mr. W. Benyon: I draw my hon. Friend's attention to paragraph 3.15 of the White Paper. If it is true that the deregulation of new rents is beneficial to employment, why should it not be done now, by backing the legislation that my hon. Friend is to introduce?

Mr. Moore: My hon. Friend's voice will obviously be added to the pressures which the Government always bear in mind when trying to decide at what point to do those things that they consider it right to do.

Mr. Stuart Randall: What consultation did the Minister have with the various employees' organisations, including the trade unions. and to what extent will employees be represented on the Central Task Force?

Mr. Moore: My noble Friend said in his statement in another place about the "Burdens on Business" study that an invitation had gone out to all in the outside world to give advice and to make a contribution. To the extent to which they did that, or ignored that advice, I cannot force trade unions or any organisations to contribute to any debate. The report has benefited from considerable outside debate.
I cannot specifically say who will be in the task force, but it will be composed essentially of civil servants and some people from outside the Civil Service. I shall address my hon. Friend's point about representative employees as opposed to small businesses to my noble Friend in the other place.

Mr. Michael Howard: I welcome the White Paper's proposals as they affect the operation of the planning system. Does my hon. Friend agree that the balance which the planning system exists to strike is not identical in a period of relatively high unemployment as in a period of relatively full employment? Does he share my hope that the White Paper's proposals will lead to increased recognition of this fact by local planning authorities?

Mr. Moore: I particularly welcome that point. I should have thought that all who were concerned about unemployment would seek to make that point. I draw my hon. and learned Friend's attention to paragraph 3.13 on page 15 which states:
the twin priorities of generating jobs and providing sufficient land for housing have not been reflected fully or quickly enough in structure plans and the planning decisions of local authorities.
We must ensure that this important point is put across in our debates.

Mr. Robin Maxwell-Hyslop: Will my hon. Friend ensure that a VAT inspector who examines the books of a business and finds that they are in order signs a statement to that effect so that another VAT inspector who disagrees with his findings cannot announce that he was wrong and try to collect many years of back duty?

Mr. Moore: My hon. Friend's suggestion seems on the surface to be so eminently sensible that I cannot see why I cannot simply say yes. I shall carefully consider his point and write to him about it.

Mr. Nicholas Winterton: Although I welcome the proposals in the White Paper as far as they go, does my hon. Friend accept that matters such as interest rates, energy costs, fair trading conditions and rates probably impose a greater burden on small businesses than any of the aspects to which the White Paper referred? Will my hon. Friend therefore direct the Treasury's attention to those matters? I welcome the planning proposals in the White Paper, especially as Carswells Transport Limited which has a head office in my constituency, is likely to have to make 600 people redundant because of a decision by the Tewkesbury district council.

Mr. Moore: I am glad that my hon. Friend has illustrated so graphically an aspect of the planning implications for jobs which might be in jeopardy. There are many aspects of business beyond the particular burdens imposed by administrative and legislative regulation. The White Paper addresses that problem. I am delighted to have my hon. Friend's support in our attempt to face these difficulties.

Sir Kenneth Lewis: As one who has been involved in a comparatively small business, I know that the White Paper will be warmly welcomed by people in business, provided that the Government get on with it. The White Paper states that the task force will be set up for three years. Will it really take three years? I hope that the task force will have something to show for its work if not this Guy Fawkes' day then by 5 November 1986. Will my hon. Friend take account of the fact that "Burdens on Business", which was issued by the Department of Trade and Industry, came out in March? The Cabinet task force should direct its attention to that report on which there has not yet been any action.

Mr. Moore: My hon. Friend will be delighted to know that this White Paper is the action that flows from the "Burdens on Business" report. I draw the attention of the House to the relative position of that three-year rule in relation to the task force. Paragraph 8.7 on page 35 states:
In order to prevent the setting up of permanent machinery which may outlive its usefulness—and to serve as an example to others—the Government have decided that the life of the task force should be limited to about three years, in the first instance, at which stage there will be a review of its performance".
I reassure my hon. Friend that the three-year period has nothing to do with the desire to implement the actions in this document immediately.

Mr. Tony Marlow: As it appears that my hon. Friend the Financial Secretary is about to establish a splendid platoon of civil servants—

Mr. Nicholas Winterton: Section.

Mr. Marlow: —section of civil servants to scrutinise any regulations that might threaten to drown our small businesses in a sea of paper work or to throttle them with red tape, will my hon. Friend say that, as the greatest threat to the life and sanity of any small business comes from regulations defined by the megabureaucrats in Brussels, those regulations will be subject to the same scrutiny by the same committee?

Mr. Moore: I know that my hon. Friend, who has been corrected on his infantry advice—10 is nearer a section than a platoon—will be pleased to look at paragraphs 6.1 and 6.2 on page 29. They bring out the ways in which the Government's initiatives in Brussels will ensure that the same type of unit is created there so that the same attempt is made to reduce the regulations and the excessive burdens on the bureaucrats. We have already pressed in Brussels for a review of all existing and proposed legislation and for the establishment of a permanent procedure to vet permanent and future proposals with respect to their impact on business.
The Government have undertaken a review and have put to the Commission and other member states an initial list of 40 directives or regulations which have been


adopted or are in the pipeline and which we regard as excessively burdensome. My hon. Friend will be happy to know that action is already in train.

Mr. Tim Yeo: Is my hon. Friend aware that the White Paper is most welcome because, irrespective of individual items, its net effect will be to promote the creation of jobs, except perhaps for members of the Opposition Front Bench? I reiterate my concern that two of the most enticing measures—raising the VAT threshold, and deregulating new private lettings—do not have a timetable set for their implementation.

Mr. Moore: I thought that I had made clear the Government's strong position on the first matter. I recognise that my hon. Friend is adding to the support for both items to ensure that there is a greater sense of urgency.

Mr. Michael Hirst: Is my hon. Friend aware that one of the most irksome burdens on small businesses is the preparation and completion of quarterly VAT returns? When reviewing the VAT threshold, will my hon. Friend consider the possibility of smaller businesses paying VAT on an estimated basis during three quarters with full annual accounting once a year?

Mr. Moore: I shall certainly look carefully at that proposal.

Mr. Bowen Wells: Does my hon. Friend agree that the reaction of the Opposition Front Bench, especially of the hon. Member for Sedgefield (Mr. Blair), reflects the fact that Labour Members do not understand how new jobs will be created through small businesses? Does that mean that the Labour party is basically unqualified to take office? Does my hon. Friend agree that any self-respecting business has long since ignored trivia, much of which is included in the White Paper, but welcomes their exemption? Will my hon. Friend pay attention in his Department to a long-seen need to simplify methods and encourage low interest rates to obtain venture capital for more small business start-ups?

Mr. Moore: I hear what my hon. Friend says in his latter point, but I know that he will welcome the extraordinary success of the business expansion scheme and the way in which many regard the opportunities available through the business expansion and loan guarantee schemes as being much more attractive than investing in many other parts of the world.
On my hon. Friend's first point, I can happily leave the absence of the Opposition's qualifications to the electorate.

Mr. Michael Fallon: Is my hon. Friend aware that the White Paper will be warmly welcomed in the north-east where the biggest burdens on business are the Labour councils which frustrate planning applications, refuse to sell industrial land freehold and seem hell-bent on establishing business-free zones? Will my hon. Friend draw the attention of my right hon. Friend the Chancellor to the need to allow the industrial companies that want to expand the right to buy land freehold from public authorities?

Mr. Moore: I shall draw the attention of my right hon. Friend the Chancellor to that point. My hon. Friend is

absolutely right. His description of business-free zones, in comparison with the attempt to introduce simplified planning zones, perfectly illustrates the difference between the Government's attempts to give practical help and the Opposition's posturing.

Mr. Henry Bellingham: Is my hon. Friend aware that many small businesses and entrepreneurs in west Norfolk will welcome these proposals? Obviously judgment cannot be passed until action is taken, and I urge the Government to get on and take that action. Is it not time that the small firm was totally exempted from the requirements of the annual audit?

Mr. Moore: In the White Paper, there is a reference to a discussion in relation to the potential exemption of the small firm from the annual audit. With regard to the first point, my right hon. and noble Friend in another place will be leading this activity within Government with his normal sense of aggression. I am sure that, through his leadership, we will have action in this area.

Mr. Roger Gale: I welcome the broad thrust of the White Paper but notice that some Departments appear to have contributed rather more wholeheartedly than others to the work of Lord Young. I am sure that Thanet farmers will be pleased to know that
The Agricultural Departments take action whenever possible to ease the burdens on agricultural, horticultural, fisheries and food sector businesses imposed by domestic legislation".
May we therefore look forward to the early abolition of the Potato Marketing Board?

Mr. Moore: I shall draw my hon. Friend's remarks about the Potato Marketing Board to the attention of my right hon. Friend the Minister of Agriculture, Fisheries and Food.

Mr. Peter Thurnham: Does my hon. Friend feel that this welcome White Paper goes far enough in helping to create new jobs? If he is suggesting that 1·6 million new jobs could be created, are we doing enough to get rid of Socialist red tape?

Mr. Moore: My hon. Friend is absolutely right. This is a first step, it is an important beginning, but it is a critical step in the long-term direction of removing the burdens which restrain business from creating new job opportunities.

Mr. Alan Howarth: Is my hon. Friend aware of studies showing that in the United States a remarkably high proportion of existing businesses were originally started in their founders' homes? Will he comment on those findings? Does he agree that any measures that the Government may be able to take to make it easier for somebody to start a business in his or her own home in this country could be of significant benefit in reducing unemployment?

Mr. Moore: My hon. Friend is right about the American studies. I have some experience of that side of the Atlantic. He will be interested to know that the Government have considered this matter in the White Paper at pages 12 and 13 in section 3.6, paragraph (vii) (a), (b) and (c). I know that he will be particularly pleased with what the White Paper says on this issue.

Mr. Neil Hamilton: I welcome my hon. Friend's spirited response to my hon. Friend the Member


for Norfolk, North-West (Mr. Bellingham) when he said that he would put maximum pressure on Ministers to implement these proposals. Does he expect to get more cooperation from them on deregulation than the Treasury has had on containing public expenditure?

Mr. Moore: I shall try to ignore the potential twist in that tail and simply say that the product is here. There has clearly been a major effort by all Departments of Government to ensure that within three and a half months there is a comprehensive attempt to lift the burdens on business.

Mr. Edward Leigh: Does my hon. Friend agree that rural unemployment is a particular problem, not so much because people in villages experience difficulty in finding jobs but because they have to go to towns to get them? This is in no small way due to the controls which central Government and local government have piled on village industry.
What will the task force be doing to encourage people to set up industries in their own homes, given that most new businesses are clean and efficient? In particular, will my hon. Friend encourage the Ministry of Agriculture, Fisheries and Food to go rather further? According to paragraph 5.29, its only contribution so far has been to free
certain aspects M trade in cattle semen".

Mr. Moore: I think that my hon. Friend will know that the Ministry does go a little further. The planning regulations applicable to rural areas emanate in most cases from the Department of the Environment. I know that he will be pleased when he reads the White Paper with more care because he has argued so vigorously for many of the proposals in it. I will certainly press my right hon. Friend the Minister to consider what other contribution he can make to this aspect of deregulation.

Mr. James Hill: My hon. Friend has made great play of the deregulation side of the White Paper. Is he aware of my early-day motion on impediments to free ports? It concerns a series of regulations being brought forward by Customs and Excise, and, if ever there was a case for deregulation, it is within the free ports area.

Mr. Moore: I am aware of my hon. Friend's early-day motion. I will certainly examine that matter again with Customs and Excise.

Royal Assent

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Road Traffic (Production of Documents) Act 1985.
2. Gaming (Bingo) Act 1985.
3. Agricultural Training Board Act 1985.
4. Family Law (Scotland) Act 1985.
5. Prohibition of Female Circumcision Act 1985.
6. Controlled Drugs (Penalties) Act 1985.
7. Licensing (Amendment) Act 1985.
8. Copyright (Computer Software) Amendment Act 1985.
9. Hospital Complaints Procedure Act 1985.
10. Local Government (Access to Information) Act 1985.
11. Sexual Offences Act 1985.
12. Charter Trustees Act 1985.
13. Insurance (Fees) Act 1985.
14. Further Education Act 1985.
15. Food and Environment Protection Act 1985.
16. Surrogacy Arrangements Act 1985.
17. Representation of the People Act 1985.
18. Local Government Act 1985.
19. Royal Holloway and Bedford New College Act 1985.
20. Streatham Park Cemetery Act 1985.
21. Harrogate Stray Act 1985.
22. Alexandra Park and Palace Act 1985.
23. C-Poultry Company Limited Act 1985.
24. Plymouth Marine Events Base Act 1985.
25. Greater London Council (Money) Act 1985.

Lorries (GLC Ban)

Mrs. Gwyneth Dunwoody: On a point of order, Mr. Speaker. I shall be grateful if you will confirm that it is impossible to discuss the arrogant bungling of the Secretary of State for Transport since he has appealed to the courts in the matter of the Greater London Council ban on lorries. Is that the case?

Mr. Speaker: That is the case. I understand that the right hon. Gentleman has lodged an appeal today so that the matter is sub judice.

BILL PRESENTED

INTERNATIONAL FAIR TRADING

Mr. Michael Latham, supported by Mr. Greville Janner, Mr. Peter Thomas, Mr. Robert C. Brown, Mr. Geraint Howells, Mr. Ian Wrigglesworth, Mr. Roy Beggs, Sir Geoffrey Finsberg, Mr. Ian Mikardo, Mr. Ivan Lawrence, Dr. M. S. Miller and Sir John Biggs-Davison, presented a Bill to make further provision regarding fair international trade between the United Kingdom and certain countries outside Her Majesty's dominions, with particular reference to the trade boycott of the state of Isreal by members of the League of Arab States: And the same was read the First time; and ordered to be read a Second time upon Friday and to be printed. [Bill 194.]

STATUTORY INSTRUMENTS, &c.

Ordered,
That the Inshore Fishing (Prohibition of Fishing and Fishing Methods) (Scotland) Order 1985 (S.I., 1985, No. 962) be referred to a Standing Committee on Statutory Instruments. &amp;c.—[Mr. Durant.]

Rent Acts (Amendment)

Mr. Francis Maude: I beg to move,
That leave be given to bring in a Bill to amend the Rent Acts to make new provision in relation to the supply of private rented accommodation.
I hesitate to suggest new legislation in view of the horrifying list that we have just heard you read out. Mr. Speaker. It is already a very complicated Session. I am sure that the House will be glad to know that there is very little prospect of this measure reaching the statute book in this Session.
We have in this country a substantial net housing surplus, but at the same time a large number of people are homeless. The explanation for this apparent paradox is quite simple. Enormous numbers of houses and flats remain empty. A trip down the high street of any town will reveal that a number of flats above shops are generally empty. Unless the shopkeeper lives in the flat, it will generally be empty. The same applies to farm cottages. I know of one farm which has 12 cottages, all of which are empty. In London alone there are estimated to be 200,000 empty dwellings.
We have to ask ourselves why they are kept empty. If one examines the Rent Acts, the explanation becomes quite simple. If a landlord allows a tenancy to occur in any of those dwellings, he runs the risk of losing control of the dwelling for up to 100 years because not only will the present tenant have absolute security of tenure but so, too, will two generations of successors. A small business man, a shopkeeper or a farmer does not know what the state of his business will be in two years' time, let alone in 100 years' time. How on earth can he justify ceding possession and control of the property in that way? The farmer may easily decide in two years' time that he wants possession of a farm cottage. If he wants to take on an extra employee, he must have that accommodation available. Therefore, he keeps the dwelling empty, and another homeless person is kept homeless.
Even if he allows a tenancy to occur, a state official is empowered to intervene to set a so-called fair rent. Fair rents throughout the country now represent a net yield of some 1 or 2 per cent. on the investment. That is a bad return in anybody's book. It is approximately one third of the market rent, and it goes a long way to explain why a number of private landlords allow their properties to become dilapidated and to fall into bad repair.
My proposal would allow all new lettings to take place on terms agreed between the landlord and the tenant. It would affect no existing tenancies. All existing tenants would retain security and the ability to have their rents set by the rent officer.
Under my proposal, new landlords and tenants would be able to agree that the tenancy should run for, say, a period of two years at a rent agreed between the two of them. This would be an ordinary agreement enforceable in the courts by either party in the ordinary way, and the tenant would have absolute security of tenure for the period of that tenancy.
There is no reason why in a free society Parliament should take from responsible adults the power to make agreements on terms acceptable to both parties. It would be outrageous if we were to suggest that state officials


should have the power to intervene between the buyer and seller of a house or a car and to say, "You cannot sell it for that price because it is not a fair price. You must sell it for this price." That would be monstrous. It is a concept that is quite alien in a free society. It is time that we got rid of this ridiculous control that prevents landlords and tenants making arrangements to their mutual advantage.
By drying up the supply of private rented accommodation, the Rent Acts have done untold damage to the homeless and the low paid, especially to the young and the single homeless for whom the private rented sector has traditionally provided accommodation. Indeed, the Labour party is now the only party—perhaps apart from the Communists and all points Left—that does not accept the need for reform of the Rent Acts. Even the late Mr. Anthony Crosland, the Minister who piloted through the 1974 Act, was apparently persuaded that it would dry up the supply of rented accommodation. How right he was. We are now reaping the fruit of that.
This artificially created housing shortage has desperately damaged the mobility in the labour market on which we so desperately rely. Many of my constituents in the west midlands have told me that they have found jobs in the south and south-east. They want to take those jobs but cannot move there because there are no houses to buy that they can afford, no chance of getting a council tenancy and no private rented accommodation to be had. We have lost that crucial flexibility in the housing market that is so important for flexibility in the labour market. The result is that we maintain high levels of unemployment in some parts of the country while there is a growing scarcity of labour in others. That cannot make sense.
I am sure that some bright spark on the Labour Benches—[HON. MEMBERS: "Bright?"] I agree that the material is not promising, but I am sure that a Labour Member will raise the spectre of Rachmanism. But the fact is that the Rent Act created Rachmanism. That was at its peak in the 1950s when rents were frozen—eventually for 18 years—and absolute security applied. Rachmanism survived the 1957 Act only in the remaining controlled sector. The plain fact is that if we deny landlords the right to claim possession of their property through the courts the unscrupulous landlords will turn to alsatians and the scrupulous landlords will keep their dwellings empty. It will be the homeless who will suffer.
If lettings are made on terms agreed between the parties, so that the landlord gets a reasonable return on his investment and knows that at a fixed date he can obtain possession of the property, there is absolutely no incentive to go outside the law, and that would be extra protection for the tenant.
Someone else will no doubt mention the 1957 Act and the fact that the decline in the private rented sector increased after that. Of course it did, because that was a time of great growth in owner occupation when there were enormous incentives on landlords to sell previously rented accommodation into owner occupation. That no longer applies to the same extent, and anyone who does not believe that the decontrol of rents will stimulate the growth of new accommodation is living in cloud-cuckoo-land.
One of the effects of rent control and security of tenure has been to push many tenants into "loophole" tenures—company lets, holiday lets and licences. That is unsatisfactory for both parties. The tenant does not know

where he stands. It would be much better if he could agree a tenancy with the landlord for a fixed term at a fixed rent so that he knows where he stands for that period.
Similarly, by denying landlords an economic return on the property, rent controls have caused a large number of properties to fall into disrepair. They have discouraged landlords from improving property. By allowing them an economic return, we shall enable the tenants to benefit by encouraging landlords to improve and repair properties.
The Government took a small and timid step by introducing the shorthold tenure. They spoilt that potentially beneficial measure by including it within the fair rented sector. Again, landlords were discouraged from embarking on letting new properties. We must go further than that. The Government also introduced assured tenancies, a marginal measure that could be improved and increased by extending it to rehabilitated property. That would be particularly helpful in the inner cities.
It should be recognised that the decontrol of new lettings would increase incentives on landlords to remove tenants to enable them to create other new lettings. Therefore, my Bill would substantially increase the penalties for harassment. It would also extend to licensees the Protection from Eviction Act, and that would fill an existing gap.
The Government have announced that they believe that this type of reform is essential, and the White Paper that has just been issued confirms that. However, they said that they propose to defer this essential reform until after the next election. This is a desperately needed and urgent social reform. The present system does untold damage to mobility, to the homeless, to the weak and to the vulnerable. The Government should reinstate this measure into the next Session of Parliament and make it the flagship of the next Queen's Speech. It should be given a high priority. The remedy for the present scandal of empty houses and homeless people lies within the power of this Parliament, and we should take steps to use it. I urge the Government to add rent control to the bonfire of controls that has just been announced, and the sooner the better.

Mr. David Winnick: rose—

Mr. Speaker: Is the hon. Gentleman seeking to oppose?

Mr. Winnick: Yes, Mr. Speaker.
The first question to ask is why Tory Back Benchers use the ten-minute Bill procedure to argue for a change in law on the Rent Acts? After all, their Government are in office. Moreover, they are a Right-wing Tory Administration who have made a particular virtue of deregulation and privatisation. Surely the Prime Minister needs no lectures from the hon. Member for Warwickshire, North (Mr. Maude) about deregulation in the privately rented sector, yet the Cabinet has decided to shelve any such proposal during the lifetime of this Parliament—[Interruption.] The Secretary of State for the Environment has told us so, and if some Conservative Members bothered to come into the Chamber more regularly they would have heard the Secretary of State do so.
That statement caused much upset to the Minister for Housing and Construction, the hon. Member for


Eastbourne (Mr. Gow), who is just as enthusiastic as the hon. Member for Warwickshire, North (Mr. Maude), but the Minister lost the battle.
Why has the Cabinet concluded that it will not act, at least during the lifetime of this Parliament, along the lines advocated in the proposed Bill? The simple explanation is that the Prime Minister and her Cabinet colleagues know how electorally unpopular it would be to accept the hon. Gentleman's suggestion. They have not forgotten the notorious Rent Act 1957. When the hon. Member for Warwickshire, North, like so many others, argues that deregulation would produce more rented accommodation, he should remember what the right hon. Member for South Down (Mr. Powell) said in 1956. The right hon. Gentleman was then a junior housing Minister in a Conservative Administration, and on 21 November 1956, when he was helping to pilot through what became the Rent Act 1957, he said that the Bill
will halt the drain upon rented accommodation, it will release additional accommodation that is under-used or wasted, it will arrest the deterioration of millions of houses for lack of maintenance, and it will give to persons who are moving or setting up home the opportunity to find accommodation in the market.
They were virtually identical to the words used by the hon. Member for Warwickshire, North today. However, things did not quite work out that way.
In June 1956 privately rented dwellings numbered nearly 6·5 million. In December 1961 that figure had decreased to 5 million. The Rent Act 1957 did not do what the hon. Gentleman says his present Bill will do. It did, however, create a tremendous amount of homelessness, misery and injustice. As a result of that Act a large number of people lost their homes. The local authorities, including the one of which I was then a member, had no alternative but to rehouse the people forced out by the 1957 Act. That Act will always be remembered for the injustice and misery it caused, and we on the Labour side have no intention of forgetting it.
Shocking abuse and injustice, which became known as Rachmanism, were the product of that Act. Rachman and his gangster colleagues acted as they did because they knew that if they could dislodge from his accommodation a tenant who had Rent Act protection that accommodation would then be available for letting at any rent that Rachman and his colleagues wanted to set. The 1957 Act became so discredited that when the Conservative party went into opposition in 1964 it could not bring itself to argue against the Labour Government's repeal of the legislation.
That Act of course was a large issue in the 1964 election campaign, and some people would argue, bearing in mind Labour's majority in that election, that Labour would not have won without the effects of that Act. That is one of the reasons why the Prime Minister is so reluctant to act. In her constituency about 20 per cent. of the electorate live in privately rented accommodation. I wonder how many people in Finchley would want the hon. Gentleman's Bill? [Interruption.]

Hon. Members: Order.

Mr. Speaker: Order. It is for me to say "Order."

Mr. Eric Heffer: About time too, Mr. Speaker, with all due respect.

Mr. Winnick: We know that many Conservative Members—

Mr. Nicholas Baker: On a point of order, Mr. Speaker. The speech by the hon. Gentleman is giving rise to some lack of attention on the part of many people in the House. That is because he does not seem to be addressing his remarks to the substance of the Bill.

Mr. Speaker: I am listening very carefully. The hon. Gentleman is in order and I think that he is about to finish.

Mr. Winnick: A number of right hon. and hon. Members clearly have property interests, though I am not suggesting that the hon. Gentleman has. They are therefore very keen to support the measure proposed by their hon. Friend.
Shorthold tenancies, about which the Government boasted at the time, have been a complete failure. So have the other provisions that the Government made for deregulation. The real need at the moment is not what the hon. Gentleman is suggesting but to provide rented accommodation in the publicly rented sector. How many people now in bed-and-breakfast accommodation and homeless or near homeless would be helped if the hon. Gentleman's suggestion were implemented? What is needed by people who are not able to obtain a mortgage is decent and adequate accommodation at a rent that they can afford.
It is a scandal that so few dwellings are now being built in the public sector. In the present year, it is estimated that no more than 30,000 new council dwellings will be built. We need more council dwellings, not another 1957 Rent Act, not another provision to enable the Rachmans of this world to make a lot of money. We require public sector and voluntary accommodation for people who desperately need housing. I hope the House will reject the Bill, and I hope also that the country will discover, as we have discovered today, that a majority of Tory Members of Parliament are willing to impose on many private tenants who now have protection all the harm, insecurity and possible homelessness that would result from the passing of this Bill.

Question put, pursuant to Standing Order No. 15 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—

The House divided: Ayes 159, Noes 160.

Division No. 278]
[4.45 pm


AYES


Adley, Robert
Brown, M. (Brigg &amp; Cl'thpes)


Amery, Rt Hon Julian
Browne, John


Ashby, David
Bruinvels, Peter


Aspinwall, Jack
Bryan, Sir Paul


Baker, Nicholas (N Dorset)
Buck, Sir Antony


Baldry, Tony
Budgen, Nick


Banks, Robert (Harrogate)
Carlisle, Kenneth (Lincoln)


Beaumont-Dark, Anthony
Chapman, Sydney


Beggs, Roy
Clark, Sir W. (Croydon S)


Bellingham, Henry
Clegg, Sir Walter


Bendall, Vivian
Cockeram, Eric


Benyon, William
Colvin, Michael


Best, Keith
Corrie, John


Bevan, David Gilroy
Couchman, James


Biggs-Davison, Sir John
Cranborne, Viscount


Blackburn, John
Douglas-Hamilton, Lord J.


Blaker, Rt Hon Sir Peter
du Cann, Rt Hon Sir Edward


Bottomley, Mrs Virginia
Eggar, Tim


Bowden, Gerald (Dulwich)
Eyre, Sir Reginald


Bright, Graham
Farr, Sir John


Brinton, Tim
Fookes, Miss Janet






Forman, Nigel
Monro, Sir Hector


Forsyth, Michael (Stirling)
Moynihan, Hon C.


Forth, Eric
Murphy, Christopher


Fox, Marcus
Neale, Gerrard


Franks, Cecil
Nicholls, Patrick


Fry, Peter
Onslow, Cranley


Gale, Roger
Osborn, Sir John


Galley, Roy
Ottaway, Richard


Gardiner, George (Reigate)
Pawsey, James


Gardner, Sir Edward (Fylde)
Pollock, Alexander


Gorst, John
Portillo, Michael


Grant, Sir Anthony
Powell, Rt Hon J. E. (S Down)


Gregory, Conal
Powell, William (Corby)


Grist, Ian
Powley, John


Ground, Patrick
Prentice, Rt Hon Reg


Grylls, Michael
Price, Sir David


Hamilton, Neil (Tatton)
Prior, Rt Hon James


Hannam,John
Proctor, K. Harvey


Hargreaves, Kenneth
Ridsdale, Sir Julian


Harris, David
Rippon, Rt Hon Geoffrey


Haselhurst, Alan
Robinson, Mark (N'port W)


Hawkins, Sir Paul (SW N'folk)
Roe, Mrs Marion


Hayes, J.
Rowe, Andrew


Hayward, Robert
Rumbold, Mrs Angela


Hickmet, Richard
Ryder, Richard


Hill, James
Sayeed, Jonathan


Hind, Kenneth
Shepherd, Colin (Hereford)


Hirst, Michael
Silvester, Fred


Holland, Sir Philip (Gedling)
Sims, Roger


Holt, Richard
Smith, Sir Dudley (Warwick)


Hordern, Sir Peter
Spicer, Jim (W Dorset)


Howard, Michael
Stanbrook, Ivor


Howarth, Alan (Stratf'd-on-A)
Steen, Anthony


Howarth, Gerald (Cannock)
Sumberg, David


Howell, Rt Hon D. (G'ldford)
Temple-Morris, Peter


Howell, Ralph (N Norfolk)
Terlezki, Stefan


Jessel, Toby
Thorne, Neil (Ilford S)


Key, Robert
Thornton, Malcolm


King, Roger (B'ham N'field)
Thurnham, Peter


Knight, Greg (Derby N)
Trotter, Neville


Knowles, Michael
Twinn, Dr Ian


Latham, Michael
Vaughan, Sir Gerard


Lawler, Geoffrey
Walden, George


Leigh, Edward (Gainsbor'gh)
Walker, Bill (T'side N)


Lilley, Peter
Wall, Sir Patrick


Lord, Michael
Waller, Gary


Lyell, Nicholas
Walters, Dennis


McCurley, Mrs Anna
Ward, John


MacKay, Andrew (Berkshire)
Warren, Kenneth


Maclean, David John
Wells, Bowen (Hertford)


McNair-Wilson, M. (N'bury)
Wells, Sir John (Maidstone)


McQuarrie, Albert
Wiggin, Jerry


Marland, Paul
Wilkinson, John


Marlow, Antony
Wolfson, Mark


Maude, Hon Francis
Wood, Timothy


Meyer, Sir Anthony
Yeo, Tim


Mills, Iain (Meriden)



Mills, Sir Peter (West Devon)
Tellers for the Ayes:


Mitchell, David (NW Hants)
Mr. Michael Fallon and Mr. Christopher Chope.


Molyneaux, Rt Hon James





NOES


Anderson, Donald
Bidwell, Sydney


Archer, Rt Hon Peter
Blair, Anthony


Ashton, Joe
Boothroyd, Miss Betty


Bagier, Gordon A. T.
Boyes, Roland


Barnett, Guy
Brown, Gordon (D'f'mline E)


Barron, Kevin
Brown, N. (N'c'tle-u-Tyne E)


Beckett, Mrs Margaret
Brown, R. (N'c'tle-u-Tyne N)


Beith, A. J.
Brown, Ron (E'burgh, Leith)


Bell, Stuart
Bruce, Malcolm


Benn, Tony
Caborn, Richard


Bennett, A. (Dent'n &amp; Red'sh)
Callaghan, Jim (Heyw'd &amp; M)


Bermingham, Gerald
Campbell-Savours, Dale





Carter-Jones, Lewis
McCartney, Hugh


Clark, Dr David (S Shields)
McDonald, Dr Oonagh


Clarke, Thomas
McGuire, Michael


Clay, Robert
McKay, Allen (Penistone)


Clwyd, Mrs Ann
McKelvey, William


Cocks, Rt Hon M. (Bristol S.)
MacKenzie, Rt Hon Gregor


Coleman, Donald
McNamara, Kevin


Conlan, Bernard
McTaggart, Robert


Corbett, Robin
McWilliam, John


Cowans, Harry
Madden, Max


Cox, Thomas (Tooting)
Marek, Dr John


Craigen, J. M.
Marshall, David (Shettleston)


Crowther, Stan
Martin, Michael


Cunliffe, Lawrence
Maxton, John


Cunningham, Dr John
Maynard, Miss Joan


Dalyell, Tarn
Meacher, Michael


Davies, Ronald (Caerphilly)
Meadowcroft, Michael


Davis, Terry (B'ham, H'ge H'l)
Michie, William


Dewar, Donald
Millan, Rt Hon Bruce


Dixon, Donald
Miller, Dr M. S. (E Kilbride)


Dobson, Frank
Morris, Rt Hon A. (W'shawe)


Dubs, Alfred
Morris, Rt Hon J. (Aberavon)


Duffy, A. E. P.
Nellist, David


Dunwoody, Hon Mrs G.
O'Neill, Martin


Eadie, Alex
Orme, Rt Hon Stanley


Eastham, Ken
Park, George


Edwards, Bob (W'h'mpt'n SE)
Parry, Robert


Evans, John (St. Helens N)
Patchett, Terry


Fields, T. (L'pool Broad Gn)
Pavitt, Laurie


Fisher, Mark
Pike, Peter


Flannery, Martin
Powell, Raymond (Ogmore)


Foot, Rt Hon Michael
Radice, Giles


Forrester, John
Randall, Stuart


Foster, Derek
Redmond, M.


Fraser, J. (Norwood)
Richardson, Ms Jo


Freeson, Rt Hon Reginald
Robertson, George


Freud, Clement
Robinson, G. (Coventry NW)


Garrett, W. E.
Rooker, J. W.


George, Bruce
Rowlands, Ted


Gilbert, Rt Hon Dr John
Sedgemore, Brian


Gould, Bryan
Sheldon, Rt Hon R.


Hamilton, James (M'well N)
Shore, Rt Hon Peter


Hamilton, W. W. (Central Fife)
Short, Ms Clare (Ladywood)


Hardy, Peter
Short, Mrs R.(W'hampt'n NE)


Harman, Ms Harriet
Skinner, Dennis


Harrison, Rt Hon Walter
Smith, Rt Hon J. (M'kl'ds E)


Haynes, Frank
Soley, Clive


Heffer, Eric S.
Steel, Rt Hon David


Hogg, N. (C'nauld &amp; Kilsyth)
Stott, Roger


Home Robertson, John
Strang, Gavin


Howell, Rt Hon D. (S'heath)
Straw, Jack


Howells, Geraint
Thomas, Dafydd (Merioneth)


Hoyle, Douglas
Thomas, Dr R. (Carmarthen)


Hughes, Dr. Mark (Durham)
Thompson, J. (Wansbeck)


Hughes, Roy (Newport East)
Thorne, Stan (Preston)


Hughes, Sean (Knowsley S)
Tinn, James


Hughes, Simon (Southwark)
Torney, Tom


Hume, John
Wainwright, R.


Janner, Hon Greville
Wareing, Robert


Johnston, Sir Russell
Weetch, Ken


Jones, Barry (Alyn &amp; Deeside)
Wigley, Dafydd


Kennedy, Charles
Williams, Rt Hon A.


Kilfedder, James A.
Winnick, David


Lambie, David
Wrigglesworth, Ian


Leighton, Ronald
Young, David (Bolton SE)


Lewis, Ron (Carlisle)



Lewis, Terence (Worsley)
Tellers for the Noes:


Litherland, Robert
Mr. Jeremy Corbyn and Mr. Harry Cohen.


Livsey, Richard



Lloyd, Tony (Stretford)

Question accordingly negatived.

Rate Support Grant (England)

The Minister for Local Government (Mr. Kenneth Baker): I beg to move,
That the Rate Support Grant Supplementary Report (England) (No. 3) 1982/83 (House of Commons Paper No. 504), which was laid before this House on 11th July, be approved.
It may be for the convenience of the House if we discuss at the same time the following motion:
That the Rate Support Grant Supplementary Report (England) 1985/86 (House of Commons Paper No. 478), which was laid before this House on 4th July, be approved.
This has already been an interesting day in local government terms. About an hour ago, Mr. Speaker, you announced that the Local Government Bill had received Royal Assent. This debate is not about that, but suffice it to say that many people hoped, and many more thought, that that event would never occur. Now that that Bill has become an Act, I hope that there will be co-operation by all councils to ensure a smooth transition to the new regime when the Greater London council and the six metropolitan counties come to an end at midnight on 31 March 1986.
We now have another debate on the rating system. Such debates often acquire the nature of seminars. I believe that Mr. Edward Pearce referred in the Daily Telegraph to the
verbal sludge of municipal speak
which characterises many parliamentary debates on rating matters. I shall try to avoid that verbal sludge.
I should like to remind the House of something that Fowler said in his "Modern English Usage". I paraphrase slightly. [HON. MEMBERS: "Norman Fowler?"] No, the other Fowler. He provided a classic description of the split infinitive, which can be applied to the rate support grant system. The English speaking world may be divided into those who neither know nor care how the rate support grant system operates, those who do not know but care very much, those who know and condemn, those who know and approve, and those who know and distinguish. As Fowler said:
Those who neither know nor care are the vast majority, and are a happy folk to be envied by the minority classes.
It is those who do not know but care very much with whom I feel the greatest affinity. The rate support grant system is fiendishly complicated, and of crucial importance to all of us, for it is responsible for distributing and redistributing vast sums of ratepayers' and taxpayers' hard-earned money.
I should like to make it clear that this debate is not about 1986–87. My right hon. Friend will make an announcement about rate limitation for next year, and the Government's provisional proposals for the 1986–87 rate support grant settlement, before the House rises for the summer recess next week.
The House has before it today two supplementary RSG reports. We have the first report for the present financial year, 1985–86 and the final report for the year 1982–83. This is, therefore, an occasion when we can review the total of local authority spending, the Government's policy on this, and the success of rate capping.
I remind the House of the long timetable that we are debating. Nearly one year ago, on 24 July, my right hon. Friend gave local authorities their provisional targets for the current year, 1985–86. Following consultation with local authority representatives last autumn, he announced

on 11 December the RSG details, including the final targets and the holdback tariff. On 16 January the House approved the main RSG report for the current year.
The message is one of substantial success in the long campaign to contain the growth of local authority expenditure. The information we have so far is that 107 authorities are planning to spend £278 million in excess of the targets which the House approved in January. The overspend this time a year ago was three times greater—£848 million. Overall, authorities in England have not increased their spending in real terms in 1985–86. This has reversed a 20-year trend. In the 1960s, local authority current expenditure was rising at 3·7 per cent. per year above the rate of inflation, and in the 1970s it was rising at about 3 per cent. per year above the rate of inflation. This led Tony Crosland to go to Manchester city hall in 1976 and make his brave speech, "The Party is Over". For about 18 months the party was over, because the Chancellor of the Exchequer was nailed down by the International Monetary Fund.
When we came to office, we inherited a rising level of local authority expenditure. During the past six years that level has been contained to slightly less than 1 per cent. above the rate of inflation, and this year it will just about match the rate of inflation. In effect, local authorities this year are matching their expenditure to the annual rate of inflation. This cannot possibly be presented as creating a wasteland through savage and severe cuts in local authority expenditure.
As the overspend is down, average rate increases have been in single figures for the third successive year. The average general rate increase for 1985 was 7·4 per cent. Without rate capping, rate increases would have been far higher. If Labour councils in London had had their way, the total budgets of rate-capped London boroughs would have been at least £220 million higher. For the country as a whole, the figure is more like £330 million. This means that ratepayers in London have been saved £220 million and that ratepayers in the rest of the country have been saved £110 million.
Ratepayers in the rate-capped areas have enjoyed savings. For example, the average householder in Lambeth will pay £21 less on the local rates bill than last year and a staggering £185 less than the council would have demanded if it had not been rate capped. Twelve of the 18 rate-capped authorities have issued lower rate poundages this year than in 1984–85.
The high-spending councils have known all along—despite their rhetoric—that the expenditure levels and rate limits that we proposed required no savage cuts in jobs and services. Many of them have now said so openly and some authorities, such as the Greater London council, budgeted for a rate even below the level that we set.
Does the House recall the hysteria earlier this year and the claims that local authority expenditure would be slashed as a result of rate capping—slashed to such an extent that the very elements of civilised life would be undermined? In Islington the leader, Councillor Margaret Hodge, predicted that fixing the rate at its rate-capped level would mean an immediate loss of up to 1,000 jobs and severe cuts in services. A few days before Islington fixed its rate, the finance committee chairman, Councillor Wilson, said that it was perfectly possible to fix the legal rate without cutting jobs and services. Journalists employed in Islington's public relations department have complained strongly that they were asked to lie during a


£200,000 campaign about the number of job and service cuts and that subsequent events have proved claims about cuts to be totally bogus. Public relations experts turning on their clients in this way is almost totally unprecedented and a little like the monkey biting the organ grinder.

Mr. Simon Hughes: If the system has worked so well, will the Minister explain why an authority such as Haringey, which was rate capped, had an enormous rate rise and exceeded by more than any other authority its target and incurred a gross amount of penalty? Why does the right hon. Gentleman's system produce such amazing distortions and aberrations? If he were less selective in his quotation of authorities, the system would he seen to be far more of a hit-and-miss affair and not nearly as effective at reducing local government expenditure as he thought it would be one year ago.

Mr. Baker: The hon. Gentleman will remember that at the last moment the district auditor told us and Haringey that there was likely to be a deficit on the previous financial year. Under local government law, that has to be recovered in this financial year, so we had to adjust the rate limit level for Haringey at the last minute.

Dr. John Cunningham: I remember it well.

Mr. Baker: Like the hon. Member for Copeland (Dr. Cunningham), I, too, remember the episode well. If we had not acted, the rate level in Haringey would have been much higher. The same is true for the hon. Gentleman's London borough, which is rate capped.
All of the authorities selected for rate limitation in 1985–86 have now set a rate. The campaign that was supposed to spearhead the Labour Opposition's fight against the Government whimpered to its end on 3 July, when Lambeth became the last of the rate-capped authorities to set a rate. The collapse of the rebel councils has been a triumph for the role of common sense. It has meant that, as promised, ratepayers in these areas are being protected from excessive spending.

Mr. Colin Moynihan: Is my right hon. Friend aware that, in a borough triply rate capped through the Greater London council, the Inner London education authority and Lewisham borough council, rate capping has brought welcome and popular relief? Is he further aware that in three recent council by-elections there have been substantial swings and overwhelming victory to the Conservative party in once safe Labour wards?

Mr. Baker: I am grateful to my hon. Friend for reminding the House that protecting the ratepayer is a popular policy which has its results in the ballot box.
The process of fixing a rate this year has been marred by scenes that are quite unacceptable in our free democratic society. We have seen gangs of thugs shouting from the gallery and taking over the council chamber. Mayors have refused to call in the police to restore order. Moderate Labour councillors and Conservative councillors have been physically threatened and assaulted. Mobs outside the town hall have prevented councillors from getting into the town hall. Fortunately, that is not characteric of local government. We have had flying pickets and all of the bullying antics of Scargillism. It is the highly organised brutality of the Fascist Left, and I hope that we will hear today from the Opposition Front

Bench utter and complete condemnation of these tactics. I ask the Leader of the Opposition to repudiate those tactics and the illegality in Lambeth and Liverpool.
Lambeth and Liverpool, which set a rate on 14 June—

Mr. Eric S. Heffer: rose—

Mr. Baker: I shall give way in a moment.
Lambeth and Liverpool, which set a rate on 14 June, may pay a heavy price for their delaying tactics. The auditor is investigating losses in those two councils because of the delays in rate setting and has issued formal notices of surcharge to the councillors responsible. In that regard, the auditor is acting in his capacity as the watchdog of public expenditure. I wish to make it clear that the district auditor is completely independent of central Government, and has been since the office was established 150 years ago. That position has been accepted by Governments of both parties.
It is nonsense for Labour Members to talk of the auditor being the lackey of the Conservative party. They know that during the past 12 months the Audit Commission has published reports which have been highly critical of Government policy. Labour Members should reflect on Tony Crosland's statement:
I have no power to interfere with the work of the district auditor. In no circumstances would I dream of doing so "—[Official Report,  24 March 197.5; Vol. 889, c. 62.]
I echo that statement. The auditor is equally independent now. All that I can do is to call on councillors in Lambeth and Liverpool to manage their finances properly and to prevent further losses from being incurred.

Mr. Heffer: The Minister referred to Liverpool and to some authorities where there had apparently been trouble, but I am not aware of that. Will he make it absolutely clear that there was no such trouble in Liverpool, that on no occasion did the police have to be brought in, and that no gangs invaded the city council?
Secondly, the right hon. Gentleman mentioned Liverpool and Lambeth in relation to district auditors. They were not the only local authorities which failed to set a rate on a particular day. Many other local authorities also failed to set a rate. Why have Lambeth and Liverpool been picked out by district auditors, and why have other local authorities not been tackled? Is it that some people—I am not sure who, because the Government say that they have nothing to do with district auditors—are attempting to suggest that those councils are led by loonies, whereas the others are not?

Mr. Baker: Lambeth and Liverpool do not have that unique distinction. On the hon. Gentleman's first point, I agree that rate setting in Liverpool was not marred by scenes of violence. However, rate setting in other councils, including some in London, was marred by unacceptable scenes of violence in which people were physically hurt. Pressure was applied to distort the democratic process. I am sure that the Opposition Front Bench will not sanction that. Secondly, it is up to the district auditor to decide what action to take. Lambeth and Liverpool were the last two authorities to fix a rate, and the hon. Gentleman could raise that point with the district auditor or the Audit Commission.
Some right hon. and hon. Members opposed the Rates Act 1984. They preferred to avert their gaze from a minority of local authorities' reckless disregard for public


spending and their ratepayers. A responsible Government, of any colour, cannot take such a detached attitude. We may regret the necessity to set ceilings on rates, but our responsibilities for public expenditure, and our concern to protect ratepayers, compelled us to act.
Liverpool's budget problems are of the council's making. It has ignored every opportunity to improve its grossly inefficient services and to bring down spending. It now looks to the Government for more taxpayers' money to bale it out. The council must think again. There is no question of the Government seeking to undo the rate support grant settlement approved by Parliament in January, to increase the city council's programmes at the expense of other authorities. The city council must find its own salvation. It has not helped itself by fixing a rate which it claims to be substantially less than is necessary to fund its budget. It must reduce its grossly inflated spending figure of £265 million. Each £1 million saved above the target increases its grant entitlement by £2 million. The city treasurer has already shown that £10 million can be saved, and the council must go further.
If the council cannot balance its income and spending, it remains open for it to ask the courts to set aside the rate, thereby providing the council with the opportunity to set a new one. The central message to Liverpool city council and the representatives in the House of that great city is, "Face up to reality". If the council wants to maintain services and ensure that its staff are paid, it must put its finances in order.

Mr. Robert N. Wareing: As the Government are anxious to cut public expenditure, or to keep it down to what they regard as a reasonable level, does the Minister agree that if Liverpool city council were to carry out the strictures of his Department it would have to dismiss thousands of workers and cut services? Has he estimated what the increased social benefits would cost the Department of Employment and the Department of Health and Social Security? Have the Government worked out the social cost of the policy in Liverpool and elsewhere? If they have not, they are failing in their declaimed objective.

Mr. Baker: I know that the hon. Gentleman is concerned about the matter because he represents parts of the city of Liverpool. If the city council had started to put its house in order a year or 18 months ago, it would not be in its present position. In a moment I shall point out some areas in which councils can make savings without slashing services.

Mr. Heffer: This is an important matter. Yesterday, when we met the Secretary of State and the Minister, I asked the Secretary of State whether, if Liverpool city council kept to the £222 million target suggested by the Government, it would mean cuts in services and up to 6,000 workers being thrown out of employment. He admitted that it would mean reductions in staff and that people would be thrown out of work. I remind the House that the area has one of the highest levels of unemployment.

Mr. Baker: As I said earlier, if Liverpool city council had started to address itself to its substantial overspending a year or 18 months ago, it would not be in its present position of demanding more Government money. If it

receives more money, it will be at the expense of other local authorities which are living within the system. As the hon. Gentleman will know, the city treasurer has already made it clear in the report that was given to the city council last week that the present rate level can support a budget of £229 million.
Last year, some 60 per cent. of local authorities planned to meet their spending targets. This year, 74 per cent. are doing so. That is good news, but, inevitably, our attention is directed to the 107 authorities which, if the House approves the 1985–86 report tonight, will be subject to holdback this year. The holdback tariff is deliberately severe. It is a necessary complement to the realistic spending targets which we were able to set, thanks to the advent of rate capping. Realistic targets had to be matched by much tougher holdback. Sadly, as before, a comparatively small number of local authorities have ignored their ratepayers' interests and set their budgets and rates deliberately to incur holdback.
The total holdback this year is £550 million. The House should sympathise especially with ratepayers in the areas of seven authorities, which between them account for £250 million of the total block grant to be held back. They are Avon, Cleveland, Derbyshire, Nottinghamshire, Liverpool, Greater Manchester and the West Midlands. Of the total sum of £550 million, £491 million will be forfeited by Labour-controlled councils—that is 90 per cent. That is a clear sign that old habits die hard.
Holdback need not have been incurred. The choice is not simply between spending and cutting. There is no doubt that savings can be made if a council is determined to make them. Brent authority, for example, which is under minority Conservative control, saved £24 million in 1984–85 and is on course to saving £32 million in 1985–86. In achieving that, no one has been made redundant. It has been achieved through more realistic rents, efficiency savings and a careful review of all staff vacancies, but the authority has still been able to allow £2 million growth for redecoration for schools, which were neglected for 10 years under the previous Labour administration. It has also increased the amount spent on social services for the psychiatrically disturbed. That shows what can be achieved in a relatively short time when Conservatives take over and begin to reverse the legacy of Labour overspending.

Sir Dudley Smith: The vast majority of individual ratepayers would support what my right hon. Friend is saying and his theory that local government expenditure should not exceed the rate of inflation, but should be below it. However, the great problem is that the individual ratepayer is in the minority.

Mr. Baker: My hon. Friend is right, and this will be a central feature of the review of local government finance being conducted by me and by my hon. Friend the Under-Secretary of State. Our society is unique in that it has only one tax at local level, whereas all other developed countries have a variety of taxes. That single local tax bears an enormous burden, and one strain on it is that only about one third of the locally registered electors pay full rates.

Mr. Simon Hughes: Does the Minister accept that, despite the efforts of Brent, that authority, with three other Tory-controlled London authorities, will lose money by way of clawback? If an authority which the Minister


commends must be penalised because it cannot reduce its expenditure further, does that not prove that the system is defective?

Mr. Baker: The hon. Gentleman is right, but I should say that Brent may not suffer any holdback if it continues to make savings similar to those that it has made during the past two years. I said earlier that this holdback could be suffered by local authorities. It is up to them to incur it or to make savings and tighten their belts slightly. Brent has made remarkable savings during the past two years, and I am told that it could continue to do so.
May I draw to the attention of the House the series of reports published by the Audit Commission to show how local authorities can make significant savings without a reduction in services. They could save £150 million a year if there was a better match between the number of places and the number of pupils in secondary schools. They could provide up to 20 per cent. more social services for the elderly within existing resources, and at the same time improve the quality of service to clients. Improved efficiency in vehicle fleet management could save £130 million a year without reducing standards of service or safety. They could save £20 million on refuse collection, £200 million on purchasing and £150 million on further education.
Wandsworth has made substantial savings in refuse collection. It charges its ratepayers £8·70 a year per head to empty their dustbins, whereas the ratepayers of Lambeth, which sticks to the traditional, union-dominated system, must fork out £17·58 each a year. Wandsworth has saved £25 million as a result of privatising its services, and one can see the result. The borough rate is 30·7p, whereas neighbouring Labour-controlled Lambeth—which has a similar population and social characteristics—sets a borough rate of 107·6p. Wandsworth, whose population problems are similar to those of Lambeth, makes do with 5,700 council employees, while Lambeth requires more than 10,000.
There is scope for worthwhile savings, all of which can be achieved by applying good practice more widely. Such good practice is already a way of life in many local authorities.

Mr. Peter Pike: The Minister compares Wandsworth with Lambeth. When I stay in London, I reside on the border of the two boroughs. What the Minister did not say was that the collection of refuse in Wandsworth is so appalling that I would rather pay a higher rate for a better service in Lambeth.

Mr. Baker: I understand that the hon. Gentleman lives in Wandsworth—

Mr. Pike: Yes.

Mr. Baker: How lucky he is. He has the benefit of low rates and good services.
As I said to the hon. Member for Southwark and Bermondsey (Mr. Hughes), savings can still be made by authorities which face holdback. It is not too late to make savings. Grant holdback on the basis of budgets in this report can be returned if spending turns out to be lower. For example, if Liverpool spent £10 million less than its present budget, it could reclaim £22 million worth of grant. I urge all authorities in this position to reconsider the matter, in their ratepayers' interests.
Why should one authority spend £126 per pupil on school cleaning when another can manage with £31? Why

does one council service its vans every 600 miles when identical vans can go twice as far between services elsewhere? How can it possibly be right that some vehicles go for fewer than 10 miles between services? If one authority spends £7·30 on meals on wheels to the elderly, why does another spend only £1·30? [HON. MEMBERS: "Because the quality is lower."]. If Labour Members would read the Audit Commission's reports, which I know will be unpalatable to them, they will see that the variation in the provision of services does not reflect the variation in costs. It is in the interests of all councils—whether Labour-controlled, Conservative-controlled or hung—to find ways of saving money.

Dr. John Cunningham: The Minister talks about efficiency. The Opposition welcome all attempts by local authorities to use precious public resources effectively. Since he is quoting from the Audit Commission reports, may I draw his attention to the two major reports—one on block grant distribution and the other on capital investment under the Government's financial system? The latter states:
The Commission believes that the systems have contributed to wasteful investment by a combination of delays to worthwhile projects, pressure to spend before the year end, failure to plan ahead and abrupt curbs in programmes
as a result of Government policy.
The report on the block grant distribution states:
The uncertainties associated with the present arrangements for distributing Block Grant to local authorities are now leading to higher rates than are necessary.
Are they not damning criticisms of the Government's policy?

Mr. Baker: I am glad that the hon. Gentleman has reaffirmed that the Audit Commission is not the poodle of the Government—[HON. MEMBERS: "Answer the question."] I am about to answer the hon. Gentleman's point. I must ask him to await next week's statement on the block grant system for the future. As to capital control, we are examining, with the local authority associations, ways to improve the system, which everyone recognises is imperfect.

Dr. Cunningham: Is that it?

Mr. Baker: That is the answer.
The third supplementary report for 1982–83, which is also before the House, is intended to be the last supplementary report for that year to close the books. I should say that 1982–83 was only the second year of the block grant arrangements. There is no change in the total of block grant payable to authorities, but there are changes within the total for all authorities.
I should also refer to what has become known as the housing grant-related expenditure anomaly for that year. This matter has a comparatively long history, and I apologise for the complexity of my explanation. There was an error in the main rate support grant report for 1982 in the specification of the GREA on some items of housing expenditure. It was discussed with local authority representatives in the summer and autumn of 1982. It was agreed that the first supplementary report for 1982–83, made in December 1982, should incorporate a disregard to ensure that no local authority could incur holdback as a result of the understatement of its GREA in that year. The treatment of the anomaly has been maintained in successive supplementary reports.
My right hon. Friend considered carefully whether he should correct the anomaly in his final report. After listening to the representations of the local authorities, as he does on all matters—they were divided in their views, as those who follow the matter will know—he concluded that it would be unreasonable now, in the course of the year, to alter the basis set in 1982, on which local authorities have made their 1985–86 budget and rating decisions.
I now return briefly to the supplementary report of 1985–86.

Mr. Robin Maxwell-Hyslop: Before my right hon. Friend concludes, will he consider a very important point? Of course there was not agreement among the local authorities, because £36 million was being filched from the counties and given to other areas of the country. Of course there will not be agreement between those who benefit from an error and those who lose from it. Why was it not put right in the main GREA formula, so that the shire counties would not continue to suffer in their GREA assessment from having £36 million filched from them? It is not good enough to say that there is not agreement when some benefit from the mistake and some do not. Once a mistake is located, it must be put right immediately and not continued.

Mr. Baker: It was an error relating only to 1982–83 and has not been continued subsequently. That is an important point. It is not a cumulative error. The error, which relates only to 1982–83, can be taken into account in later years.
There is a limited pool in the grant to be distributed, and if it is to be given to some it has to be taken away from others. We thought that on balance we had come to the right conclusion in leaving it where it was. We shall listen to the arguments, but there are arguments on both sides. I note what my hon. Friend said.
In conclusion, I return briefly to the main report that is before us. I am sure that Labour Members will represent the holdback schedule as harsh and draconian, and I agree that we have had to make some tough decisions, but I re-emphasis the point that I have made twice before in my speech. The decision to incur holdback is not a Government decision, but is taken by those authorities which determine to exceed the Government's expenditure guidelines. High-spending councils have only themselves to blame. I remind the House that 74 per cent. of the councils this year, compared with 60 per cent. last year, are operating within targets.
We hear a great deal about caring Labour authorities. Where is the evidence that they care for their ratepayers, when they deliberately push up rates by their flagrant over-spending? I have indicated in my speech various ways, identified by the Audit Commission, in which savings can be made, through good management and moderation.

Mr. Christopher Chope: My right hon. Friend made an eloquent plea to local authorities to obtain better value for money. Does he feel that the time has come when we should be thinking in terms of compulsory competitive tendering for all local authorities which are not doing so voluntarily?

Mr. Baker: My hon. Friend made a very distinguished contribution, when he was the leader of Wandsworth

council, to the privatisation of local authority services. He will know that we published a consultative document, and we are receiving comments upon it. When they have been collated, we shall come forward with proposals on the subject.
One of the Audit Commission reports showed that, whereas some services which had not been privatised were as efficient as those which had been privatised, every council which had privatised its refuse collection made significant cost savings. That is very convincing evidence.
I say to the high spenders that, even at this late hour, it is not too late for them to pull back and avoid the worst consequences of holdback. If they will follow the example of the sensible Conservative-controlled councils, there are savings to be made. This is the way to demonstrate a caring attitude—not by grand political gestures, but by sensible good housekeeping. The choice is not between high spending and cuts in services. The choice is between wasteful extravagance and responsible, accountable local government.

Dr. John Cunningham: The House waited with interest and not a little amusement—at least on the Opposition Benches—for the Minister of State's speech. We were wondering whether his task in presenting the reports and recommending them to the House would mark a new phase in the Government's presentation of their case. Indeed, that was so. For almost 20 minutes of his speech, the Minister did not address himself to the reports.
We were interested to know whether we would be told that a public expenditure increase in real terms of 9·5 per cent. since 1979 was a virtue, and whether a reduction in rate support grant of 23·4 per cent. in real terms in the same period was a vice—or was it vice-versa? The Minister did not say.
Against that background, is the real reduction in local government expenditure since 1979 of 4·6 per cent. regarded by the Government as a success? Public expenditure has gone up dramatically. Local government expenditure has gone down. Were the assembled Tory Members—although there were not too many of them here today—[Interruption.] There are more Labour Members than Tories present, and there are twice as many Tories as Labour Members in the House of Commons. We wondered whether the assembled Tory Members were here to applaud real cuts. Were they here to applaud public expenditure being massively up or rate support grant being massively down?
One thing is clear. In spite of the Chancellor of the Exchequer's Brecon hangover speech, the Prime Minister was correct about rate support grant. There is no middle way for this Government with rate support grant. There is only one way for them—down, down, down; so far down that the total accumulated loss to councils in England in rate support grant alone since 1969 as a result of the Government's cuts is a staggering £16·14 billion.
In 1985–86 alone, the total grant is £3·8 billion lower than when Labour left office in 1979, and that is at 1985–86 prices. They are, indeed, real cuts, and cuts that hurt millions of people, as councils of all political persuasions are caught in the Government's financial vice—or perhaps one should say vices.
It is interesting that, when political argument runs low, the Tory party wheels out the rusty old artillery and flintlocks of political abuse to fill the gap.

Mr. Robert Atkins(South Ribble): What is wrong with abuse?

Dr. Cunningham: The reality is that councils of all political persuasions are suffering as a result of the Government's policies. The hon. Gentleman asked what is wrong with abuse. I think that it was Samuel Butler who once said,
I do not mind lying but I hate inaccuracy.
The Minister of State was perhaps inwardly reflecting that he might have chosen more fertile ground for his leading role from the Front Bench. His right hon. Friend the Secretary of State recently made a speech in which he looked at public expenditure to the end of the century. That is real vision, I suppose—but I wonder. I suspect from his performance today, however, that the Minister of State has much more limited horizons in view—for example, perhaps the next Government reshuffle. Government policy has been presented as a success, although outside this House—and increasingly inside it, too, for that matter—fewer people than ever believe it to be so. Whatever the presentation, the reality is that in the two reports before us the Government's failures lie nakedly exposed.
The Local Government, Planning and Land Act 1980, which was introduced by a Conservative Government, places a duty on the Secretary of State to use the best information available to him to estimate the amount of grant to which each authority is entitled and to notify it. He is supposed to consult the local authorities. Yet today the House is asked to approve supplementary report (No. 3) for 1982–83, which is intended to close the books for that financial year. Everyone knows that, because of an error in the Department of the Environment on grant-related expenditure calculations, the shire counties and districts were deprived, as the hon. Member for Tiverton (Mr. Maxwell-Hyslop) rightly said, of £36 million. The mistake came to notice some considerable time ago but Ministers have constantly and consistently refused to correct it. It is described euphemistically in paragraph 15 of the report as an "anomaly". I think that the Minister used that word himself. How many millions of pounds must be involved before an anomaly becomes an error under this Administration?
The refusal to face facts, which is typical of the Government, illustrates the hollowness of Ministers' consistent promises to help especially the shire counties. The Government's error has been hidden away despite repeated representations. Ironically, it benefits many of the London boroughs that Tories most dislike at the expense of the counties, which many of them pretend to prefer to support and represent. The hollow claims in respect of the Berkshire factor were quickly disposed of earlier in the year and the Government's GRE error demonstrates once again their inherent weakness on these issues.
Do Conservative Members really intend to vote for and approve the report when they are aware of the facts? They know that Ministers are ignoring their representations, their error and the standing agreement between the Department and local authority associations that such errors should be corrected before the books are closed on a financial year. If that is the Government's attitude—that is what it appears to be—it exemplifies that under this Government truth is the accident of error. The issue demonstrates above all the weakness of GRE as a means

of determining grant. Such errors have even greater significance as GRE is used to set targets for council spending and ultimately to undermine local democracy through the Rates Act 1984, about which the Minister had much to say.
The Minister referred to violence, and the Opposition condemn all violence unequivocally. Violence has no place in a democratic community. Indeed, it is inimical to the entire democratic process. We defer to the Minister not one iota in our condemnation of unacceptable events over the past few months. But the Government cannot evade their responsibility for the social climate and for the attitudes that are often struck by the Prime Minister. Her aggression and uncaring attitude can be described only as provocative in the extreme.
Grant-related expenditure assessments are subjective and unfair, especially to metropolitan authorities as they take little account of the acute social problems existing in our urban areas. Over 70 per cent. of the members of the Association of Metropolitan Authorities, Conservative as well as Labour, are spending more than their GRE to cope with acute problems. They will be penalised even more harshly for such spending if, as has been rumoured. GRE is to become the new test that the Government will impose if targets and penalties are to be abolished.
The Audit Commission has told the Government that there is too much fine tuning by computers of inadequate basic data resulting in spurious accuracy and that the information used to calculate the needs for local authority services is open to serious question. When I intervened in the Minister's speech to put that to him, he said, "These matters are being considered''. These matters have been well documented for a long time, but the Government persist in using their system, and the methodology associated with it, knowing that it is open to serious question.
It is the view of all local authority associations that the Government's system, and the GREs upon which it is based, is completely discredited. Yet if reports are to be believed, the Government are contemplating using that system when they scrap targets and penalising authorities solely on the GRE formula. We would reject such an approach, and I believe that it would be rejected overwhelmingly throughout local government.
The School of Advanced Urban Studies was commissioned by the Government to examine various matters and it concluded that GREs
are inherently unsuitable to form the basis of legal limits on local spending.
That has implications for the implementation of the Rates Act as well as for setting targets for local authority expenditure. Even the Government, in their published document, which is in the Library, admit that GREs are intended to be an objective assessment of the need for spending based on independent indicators rather than the actual expenditure required for services. We reject the third supplementary report for 1982–83.
The supplementary report for 1985–86 raises many more serious objections. The total grant in 1985–86 was reduced by £660 million in real terms compared with the previous financial year. That meant that a significantly smaller pool was available to all councils. Although councils' budgets in total are only about 1·3 per cent. over proposed expenditure, grant penalties are the most severe yet. As the Minister has said, they total £550 million or 6·5 per cent. of total block grant. That illustrates the major


Treasury windfall gain from penalties imposed on councils by the Government's financial arrangements. In reality the penalties are twice the amount that is in dispute between the Department and the councils.
The Secretary of State has reputedly refused to limit the impact of the Government's system, as he could have done by disregarding expenditure by councils that have been elected to tackle the problems of some of the most disadvantaged communities in areas such as those of time-expired urban programme projects or joint financed schemes. This approach has been urged on him again by local authority associations only very recently, but it has again been rejected.
The Secretary of State has agreed to disregard expenditure on contributions to the Bradford fire disaster appeal. That sounds generous and it could be asked, "Who would disagree with that?" The irony is that Bradford council will lose £11·4 million in grant because of the severity of the penalty system that is being imposed upon it. It would be far more beneficial for Bradford if the Minister were to consider some of the disregards and got rid of the Government's iniquitous scheme than to agree a disregard for sums given to the disaster appeal, however worthy that appeal might be.
Penalties are likely to affect 107 councils. That is an illustration not of profligacy or irresponsibility, as the right hon. Gentleman implied, but of how unacceptable the Government's approach to local government finance is.

Mr. Robert Atkins: I have been listening to the hon. Gentleman with interest because he speaks with authority and sometimes with wisdom. Does he include in his remarks the borough of Tameside which has recently announced that it will spend about £300,000 a year of ratepayers' money exploring the voting records and other behaviour of north-west Tory Members of Parliament? Does he believe that that is a justified use of money? If it is not, should my right hon. Friend take action on it?

Dr. Cunningham: I can understand the hon. Gentleman being annoyed about such decisions. I have no difficulty with such matters because, unlike him and his right hon. Friend, I do not believe in central Government controlling local government expenditure, especially when it is raised through income. I do not believe that there is a sensible macroeconomic argument in favour of it. However, like the hon. Gentleman, I can identify items of expenditure by authorities that I might not support, but the Opposition have faith in the democratic system. We believe that in a plural democratic society the right way for the ratepayers—at Tameside or anywhere else—to resolve such problems is through the vote. The way to improve local government accountability is not to weaken local government and take away powers but to strengthen it—the obverse of what the Government have been doing for six years.

Mr. John Powley: The hon. Gentleman might be surprised, but I agree with most of what he has just said. I agree with accountability and democracy. If he believes what he says about accountability, surely consideration should be given to those who foot the bill. In other words, the business and commercial ratepayer has no vote and no influence and therefore local government is not accountable to them. If

he believes in democracy and accountability he must take account of the lack of accountability and democracy in the case of those who contribute more than those who vote and exercise their democratic will.

Dr. Cunningham: I am familiar with that curious argument. It has been raised many times by Conservative Members in the past two years. I am not sure what the hon. Gentleman was implying when he said that the business men have no vote. They have one vote like everyone else. We live in a system of universal suffrage. There is universal franchise. If he is suggesting that the system should be altered or tampered with, he should be explicit.
The Opposition have no intention of changing the system and we shall oppose any proposals from the Government that appear to do that—whether by giving people additional votes, imposing a tax on votes or on the right to vote through a poll tax, or by any other means. I reject the argument. I hope that I have made myself clear.
The 107 councils to which I was referring before those interventions are not deciding voluntarily, as the Minister of State implied, to spend money that they desperately need in clawback. They are not rushing into penalties willy nilly. The overwhelming majority are paying little in penalty, as he pointed out. They are not in that position out of choice. They are there despite improving their efficiency, despite using money from balances and despite rate increases, because they have decided to do their best to sustain the services and jobs—the quality as well as the range of services—wherever possible.
However, there is no disguising the fact that even many of the best managed councils have been faced with severe problems because of the cuts in rate support grant. That is most graphically spelled out by looking at an individual case. The Minister did that and I shall do the same. I should like to quote from a long letter from the Tory leader of Sefton borough council to the Secretary of State for the Environment. That gentleman pleaded for leniency for Sefton because, he said, Sefton was
staring a penalty in the face.
He continued:
There is much work that needs to be done in Sefton.
I know that my hon. Friend the Member for Bootle (Mr. Roberts) would agree with that if he had not been unfortunately absent on House of Commons business with a Select Committee, because there are many major problems in the borough. Councillor Watson, the Tory leader of the council, continued:
I am very concerned that Conservative Members on Sefton council feel that they have exhausted their capacity and indeed their desire to explain away rate increases … caused almost entirely as a result of adverse block grant movements.
That is the view of many other Tory local government leaders. He then said:
Political support is ebbing away at an alarming rate.
There are hundreds of such examples in local government after six years of these policies. The latest evidence of the political debacle facing the Conservative party was demonstrated in this year's county council election results and, more recently, the Brecon and Radnor by-election. Not only have services been undermined and jobs squandered, but rates have been forced up as a direct result of Government policy. The right hon. Gentleman carefully quoted the average industrial and domestic rate increases for the current financial year. The Chartered Institute of Public Finance and Accountancy figures show an average domestic rate increase of 9·5 per cent. this year—


shattering the Government's claims to be protecting ratepayers. Rates have now increased in real terms under this Government by more than 80 per cent. in six years. Rates fell in real terms by five per cent. under the previous Labour Government. Who governs in the ratepayers' interests?
In 1978–79, the average weekly rate payment in England and Wales, including water rate, was £3·19. After six years of those policies, it now stands at £8–27—two and a half times higher—under a Government who promised to abolish domestic rates and who pretend to protect the ratepayers.

Mr. Tony Favell: Does the hon. Gentleman recognise that the Government have a duty not just to the ratepayer but to the taxpayer, because, after all, that is where the rate support grant comes from?

Dr. Cunningham: It is astonishing that the hon. Gentleman has not noticed, after all this time, what every Labour Member is now telling him, that it is not just the rates burden that has increased under the Government but the tax burden. The tax burden is much higher after six years of these policies than it was under the Labour Government.
There is now a certain amount of panic, no doubt with attempts by the Minister for Local Government to steady the ship. The Department of the Environment Ministers are apparently willing to contemplate a tax on the right to vote in a desperate attempt to escape responsibility for what the Government have been doing for the past six years. I reiterate that there can be no consensus for a poll tax. Will the Government, if they wish a consensus, as the Prime Minister suggested at the Scottish Tory party conference, publish a Green Paper on reform of local government finance?
The Government seem oblivious to the long-term damage that they have done to local democracy and good local government. They seem unconcerned by the diminution in the quality of the crucial services such as education, transport and housing. They seem unaware of the harm done to inner city communities, black and white, to families, children, the disabled and the elderly. As Shaw said:
The worst sin towards our fellow creatures is not to hate them, but to be indifferent to them: that's the essence of inhumanity.
The Government increasingly display indifference to the problems faced by millions of people.

Mr. Peter Bruinvels: Can the hon. Gentleman square what he said with the experiences of the citizens of Leicester? They were told that, with rate capping, 25 per cent. of services would go, 800 jobs would be lost, community centres and swimming baths would be closed, and dustbins would not be emptied. Many tales of doom were told about what would happen. Now, under rate capping in Leicester, more jobs are being advertised, the council continues to operate, the rates are reduced and more people are coming to work in the city at a time when the council is spending £137,000 on an anti-rate capping political research unit. How can the hon. Gentleman say that the Conservative Government do not care when the business men of Leicester are taking on more people? Has not success come through the Government bringing rate capping to a city such as Leicester?

Dr. Cunningham: I am not sure whether the hon. Member was speaking in support of the policies of the Labour-controlled city council. He must be as aware as I am that the biggest single swing seen against the Conservative party in the county council elections was in Leicestershire. The hon. Gentleman would have lost his seat with such a swing in a general election. If he is interested in the reaction of voters to these policies, I suggest that he looks no further than the outcome of the county council elections in the county where his seat is located.

Mr. Peter Bruinvels: We have control.

Mr. Kenneth Baker: The hon. Member for Copeland (Dr. Cunningham) referred twice to the county council elections. If they were such a triumph for the Labour party, why did it end up controlling five fewer county councils at the end of the elections?

Dr. Cunningham: If the right hon. Gentleman wants me to digress into the county council elections and into the private grief of the Tory party, which was shattered in its strongholds, I can say this. The Labour party dramatically increased its share of the vote in the shires. The Tory party did not win back control of any of the 10 councils that 'we controlled when we went into the elections. It is true that we lost overall control of five such counties and it is true, I regret to say, that in some of them, thanks to Liberal collaboration, the Tories are administering the councils.
I regret that it is true in my council of Cumbria. I also regret that the Tories, with Liberal assistance, have started to implement cuts in budgets in Cumbria and, I understand, in Lancashire. However, the Tory party did not win control of any councils from the Labour party. If the right hon. Gentleman thinks that, he is deluding himself.
It is increasingly clear that the Government are not concerned about the people and their problems and do not feel responsible for the people and communities, and the country's problems. Therein lie the seeds of this Government's defeat. While Conservative Members may gloat about Royal Assent for the Bill to abolish the metropolitan councils and the GLC, their problems as a result of that appalling legislation are only just beginning. The Government have once again demonstrated, by draconian orders such as this, their invincible commitment to centralisation and control from Marsham street of the daily routines of each and every town hall in the country.
Once again, I say that the Government's policy is unacceptable to the Labour party. The past six years of Tory Government, and particularly the last two years of debate on local government, have convinced those Labour Members who still needed to be convinced—there were very few of them—that Ministers and officials in Whitehall simply cannot cope with the minutiae of local government, nor should they try. People elect local authorities to run local affairs and the evidence available to us from recent elections and opinion polls suggests that people favour more, not less, local independence from central Government.
For example, a report to the non-party constitutional reform centre shows that over half the people questioned in detail want some independence for their local council from central Government, and not less, but the Government have spent two precious years of parliamentary time enacting legislation—the Rates Act and the


Local Government (Interim Provisions) Act—and producing orders such as these that we are debating today that run counter to the increasingly popular will of the people.
We have necessarily spent this time pointing out the error of the Government's ways, frequently supported by the Government's Back Benchers, senior and junior, by the other Opposition parties, by the other place, by local government in all its shades, as well as by the public at large. It has been right and absolutely necessary for us to oppose that legislation, but now that the Government have apparently exhausted their miserable stock of malevolent attacks and ideas for local government we serve notice that we shall be talking about change under the the next Labour Government and about strengthening and enhancing the local democratic process.
The Labour party will be calling on all those who claim to care for the quality of the country's government to join us in debate. The debates will not be about the sterile attempts to abolish councils that support or oppose us, or about the arcane detail of financing individual services, which Ministers in the Department of the Environment are so pleased to be always nit-picking about, or about individual administrative areas. It will be about how to increase and improve democratic opportunities and performance in Britain in the future.
All this means a rethink about the role and function of local government and, for that matter, of the regional or strategic delivery and control of services, including some now run by appointed boards. It means the strengthening of local government and the enhancing of its powers and its role in the British economy. It does not mean the continual bleeding away of its freedom and strength, as has been happening since 1979, because we believe that it is only by strengthening local democracy that better performance and real accountability can come. Strengthened local government, with powers devolved from Whitehall, will make a major contribution to the vital and essential attack on unemployment in Britain, and strengthened support services and finance will be required to match up to the reality of full-time councillors.
On the other hand, the two reports are simply the latest in a long line of squalid impositions on local government, ratepayers and those who depend, often essentially, on local services. They offer a miserable prospect, and we reject them.

Mr. Gerald Bowden: I am delighted to be called in the debate so that I can convey the pride and pleasure that so many of my constituents feel at rate capping having taken effect in Southwark. When they find that their borough rates bill has been reduced by some 25 per cent. as a result of the Government's action, they are delighted. I offer their congratulations to the Government on that.
Southwark is a deprived area. It is an inner London area in which we know that there are great problems, but many of those problems are of the borough's own making. The hon. Member for Copeland (Dr. Cunningham) said that the worst sin was not to hate one's fellow men, but to be indifferent to them. Never have we seen a council which is more indifferent to the needs of people than Southwark in its present-day practice.
Southwark's greater failure is perhaps not just its indifference but its incompetence. We see its incompetence in its full flowering in its housing management. Here we have a borough with a housing stock of some 66,000 properties, but where 4,500 of those properties are left vacant and boarded up. Is that a way to care for the homeless? Is that how to show one's compassion to the homeless? That is an indictment of the way in which Southwark runs its housing.
Of those 4,500 vacant properties, some 1,500 have squatters in them. At a recent civic service the preacher drew attention to the fact that squatters were often more efficient at running Southwark housing than Southwark council itself. That was not a particularly spiritual message. Indeed, in the eyes of the leadership of Southwark council, it was regarded as distinctly heretical. However, the point was made that the squatters could manage housing for themselves in a better way than the council could.
Those vacant homes represent the loss of some £4 million to £5 million in rent. Is it the way to concern oneself with the careful management and housekeeping of the finances of the borough to forgo some £4 million to £5 million in rent on vacant voids? In addition to that, if that were not bad enough, rent arrears now amount to some £21 million, and £5·5 million of that is owed by former tenants. Is that a way to manage housing? Is that a way to exercise good housekeeping? Southwark can be indicted on that ground also.
It is against that background that we need to improve the way in which housing is managed in this borough, so that the benefit can be passed on to those in real need. The system demonstrates the indifference and incompetence of present housing management there. That is to cite but one aspect of the housing problem.
The aspiration of so many of my constituents in Dulwich has been towards home ownership. Those who have been council tenants for many years and who are now reaching retirement, having brought up their families in a family council home, and for whom the prospect of being a home owner never suggested itself as a reality in the past. have, as a result of the Housing and Building Control Act 1984, been enabled—in theory at least—to purchase their homes. However, since the Act has been in force—almost a year now—there have been few sales.
The powers that be in the town hall—the union bureaucracy—have attempted consistently to thwart the wishes, aspirations and hopes of prospective purchasers, by several different tactics. The latest and most dispiriting one for prospective purchasers is the law's delay. I speak as a quasi-lawyer. I recognise that there are sometimes necessary reasons for delay, but the way in which the legal department of Southwark council has delayed the preparation of the legal documents that are required for the transfer and conveyance of property is a scandal.
I am delighted to know that the Department of the Environment is to have meetings with the officers and members of Southwark council to see whether there is a way of speeding up the process, whether the council is so incompetent that it cannot find the appropriate form of words for its legal documentation, whether it should be helped, or whether the duty should be taken away from it. My constituents feel that the Government have offered them the opportunity, but the council has failed to see it through, and by its intransigence is attempting to thwart the tenants' applications to purchase their homes.

Mr. John Fraser: Did the hon. Gentleman notice in the South London Press this morning that the ombudsman had upheld two complaints against the goody-goody council of Wandsworth for exactly the sort of delay that he is complaining about in Southwark?

Mr. Bowden: De minimis non curat lex. If there were only two complaints to the ombudsman in Wandsworth, that is remarkable. I shall show my colleague from Norwood the postbag that I have, which runs to several hundred letters from frustrated tenants who are trying to buy. Two seems a very small number. I would willingly settle for two in these circumstances.
Southwark council is unable to fulfil its job in its present role. The housing management problem is far too big for it. The opportunity to improve its finances and housekeeping by the sale of some of its properties, and to redress the unhealthy imbalance between local authority and private housing—there is some 70 per cent. local authority housing and 30 per cent. private housing in the borough—is not being seized. It is an unhealthy climate, in which local authority financing cannot operate effectively. We see the demands of heavy rating on the very limited number, the minority, who pay full rates—a mere 28 per cent. of the electorate.
It is against that background that my constituents welcome and applaud the fact that rate capping has been applied to Southwark. However, that is only a beginning. There is a need for greater impetus and direction in the operation of local authorities such as inner London boroughs in general, and Southwark and Lambeth in particular, to ensure that they fulfil their proper functions, exercise good housekeeping and use the resources that are available to them for the good of those whom they are there to serve. They are patently not doing that at the moment.

Mr. Robert Litherland: This debate is about local authorities endeavouring to meet their obligations under the Rates Act, along with the targets and penalties that are imposed upon them. At the same time, they are trying to meet the needs of the community and to act in the interests of their ratepayers.
My local authority of Manchester has endeavoured to protect and promote employment, and to improve and extend services for which it is responsible, in the light of the remorseless deterioration in the standard of living and conditions of Manchester residents. At the same time, the council is opposed to any large rate increases, recognising that excessive rates only add to the hardship of its residents.
A local authority such as Manchester, a major inner city area, needs only to look at the social and economic statistics of recent years to be aware of the downward spiral of urban deprivation. Manchester now has the highest level of urban deprivation outside inner London. Unemployment is higher than the national average. In 1978 the unemployment rate stood at just over 10 per cent. It is now over 23 per cent. Male unemployment in one part of my constituency is running at over 50 per cent.
About 20,000 jobs have been lost in the north-east area of Manchester since the late 1970s—4,000 in the last couple of years. While that has been going on, people in their thousands have been languishing on the housing

waiting lists. More than 21,000 are now listed, and their chances of being housed grow weaker daily while the Tories are in power.
We in Manchester have over 6,000 unfit dwellings. Another 7,000 lack basic facilities and 58,000 are in need of renovation. Many of those are of the system-built rubbish variety which were foisted on local authorities by central Government. Massive finance will be required to try to save them or, better still, to demolish them. Many ministerial visitors have looked at that type of housing. They cry crocodile tears and say that they suffer from a design fault and require what they describe as a "repair element". That is nonsense, and they know in their hearts that a massive financial input from central Government will be required to put them right.
The unemployed and those in need of housing are only two of the groups affected by the rate support grant cuts. In addition, the city contains a concentration of deprived social groups, pensioners living alone—they now account for 17 per cent. of all households—and 51,300 single parents, and the number of residents claiming supplementary benefit has increased from 50,000 in 1980 to more than 81,000 in July 1984.
All those problems affect the provision of services. About 50 per cent. of schoolchildren are now receiving free school meals. Whether the services are for the unemployed, the homeless, the elderly in need of meals on wheels, the provision of home helps, day nursery places, cultural and recreational services, cleansing and environmental health, street lighting and road maintenance, all are vital and all fall within the responsibility of the local authority.
Despite that, the Government try to compare one authority with another and attempt to blanket coverage the lot. That cannot be done, because one cannot compare Manchester even with its sister city of Salford. Much less can Manchester be compared with Birmingham or, further afield, Torquay or Blackpool. Each local authority is different and has different needs.
Manchester believes in meeting those needs and in honouring its commitment to improve and expand its services. In its 1985–86 submissions for improvements in services, Manchester city council reckoned to spend an additional £33 million. That increase would have created 2,200 jobs, mainly among lower paid and manual workers. Staff would have been employed in old people's homes, in establishments caring for the mentally ill, in teaching and in the housing benefits sector. It would also have gone some way to restore some of the 6,000 city council jobs which have been lost, not to mention the many other jobs lost in the private sector.
To maintain services and jobs at existing levels, the city council will need to spend £276 million. The Government have set a target of £250 million. A £2 penalty for every £1 spent will mean the Government pocketing £53 million which should be used to provide jobs and services,

Mr. Favell: Will the hon. Gentleman explain why in Manchester, which is next door to Stockport—there is no grass between the two—and where there are twice the number of local government employees per head of population, there should be a downward spiral, whereas in Stockport the unemployment rate is down to less than 10 per cent.?

Mr. Litherland: The hon. Gentleman does not compare like with like. Manchester is a core city, with art


galleries, museums and so on, all requiring money for their upkeep. When we last debated this subject I tried to explain the position to the hon. Gentleman, who invariably tries to make that comparison. We in Manchester have had a mass exodus of the more able, and those strong in wind and limb, into the suburbs, leaving in Manchester those with greater needs, including the elderly, mentally ill and young unemployed.
Our massive majority on the city council has arisen because the electors want what the council can provide, if given the chance. If the people of Manchester want the level of employment and services which the council wishes to provide, it is for them, the voters, to decide. Manchester wants to provide the services which the people want and for which they have voted.

Mr. Harry Cowans: The hon. Member for Stockport (Mr. Favell) should accept that, by the inner city partnership, even the Government recognise the problems of cities such as Manchester and Newcastle. One problem is the tightly drawn boundaries, which condense those problems into smaller areas. In view of the lecture that he has received from my hon. Friend, the hon. Member for Stockport should accept that the difference between Labour and Conservative Members such as he is that we want to solve the problems, while they want to draw money away from local authorities. They claim that so long as the rates are low, the level of services does not matter.

Mr. Litherland: I am obliged to my hon. Friend for making the position abundantly clear. As he says, the inner city partnership recognises the differences and. as I have explained on many occasions to the hon. Member for Stockport, the type of comparison that he wants to make cannot be made.
Why do the Government and their Whitehall mercenaries think that they are better at costing and assessing the needs of local authorities, when central Government spending has increased by 100 per cent. since 1979, while local authority spending has fallen by 14 per cent. in real terms?
Rate support grant cuts in Manchester have amounted to £161 million in the last four years. All that cost must be borne by those of whom the Tories claim to be the champions, the ratepayers. Those cuts have been the primary cause of the massive rate increases that have occurred, with, in Manchester, the loss of more than 6,000 jobs.
The council has made representations to the Secretary of State to reconsider the harmful effects on Manchester and other local authorities of the Government's targets and penalties, with a plea for the restoration of the reduction in the level of grant paid to the city of Manchester. It is estimated that since 1979, against the growth in demand for services, the Government have reduced revenue support by more than £1 million a week.
Penalties and targets are applied unfairly. The result is that local government expenditure is by Government instruction. For example, under the housing benefit scheme, which was imposed on local government, authorities must meet all the residual costs, including the running of the local discretionary scheme to meet local needs. All of that expenditure is borne by local

government. It should be financed by central Government. In other words, it should be taken out of the cost assessment and disregarded.
Manchester city council has produced a statement on the issues which it wants the Secretary of State to disregard. They include:

"(a) the full cost of projects assisted by Government grants or projects recognised by Government as priority initiatives including

—the urban programme and UDG scheme.
—joint finance schemes with health authorities.
—European regional development fund projects.
—section 11 expenditure.

(b) the changes to advanced further education 'pooling' arrangements.
(c) the costs of operating a free school meals scheme.
(d) the cost of providing mandatory student awards".

On the subject of employment, the council said:
Disregard should be introduced for the residual cost of YTS and other schemes together with all other expenditure designed to tackle unemployment, including grants, loans, rent guarantees, mortgages, estate development and infrastructure work for industrial development.
The council said that the cost of administering housing benefit should be disregarded. All the increased charges in the nationalised industries above the cost of inflation—for instance, water and electricity charges—should be disregarded, as should services outside local authority control, for example, magistrates court expenditure net of specific grant.
These issues should exercise the mind of the Secretary of State so that he gives Manchester and other local authorities a better deal. Until the Secretary of State understands the real difficulties facing local authorities in balancing their budgets, as they must do by law, and balancing the interests of the ratepayers against those of the community to whom they are responsible for providing services, we can expect more conflict as more councils refuse to accept cuts in jobs and services.
Next year, many local authorities will confront the Government. Next year is crunch year. The Government's policy is one not of compassion or care, but of political confrontation, which is meant to strip away every vestige of local democracy as long as local authorities oppose a centralised diktat.
The Government's attack is not just on Manchester, but is part and parcel of a national campaign directed at local government and the public sector. The aim is to starve local authorities of finance. To have a monetarist policy, one must have financial control. To obtain that control one must crush all forms of organised opposition, whether trade unions, local authorities, county councils or even opposition parties. This is the sinister path down which the Government are taking us. This is fully recognised in the speeches by the more responsible elements of the Tory party. They know that to use legislation to impose centralised control on local authorities and to ride roughshod over democratic rights is sinister and foreign to the old Conservative doctrines.
The Minister said that local government finance was fiendishly complex. The attacks on the most needy in our community have been more fiendish. The Minister asked for councils such as Liverpool to be condemned. The Government stand condemned for their confrontation of local government and their obscene policies towards it.

Mr. John Powley: One quality in Parliament since the 1983 election has been the emergence


of hon. Members with practical local government experience. I commend those Labour Members with experience of local government at a senior level. For the first time for many years many Conservative Members have had such experience. Whatever our political beliefs, that experience benefits the House. We may disagree about policies, but at least we are discussing them from a background of practical experience.
I shall mention my local government experience for the benefit of hon. Members. Although they may disagree with my views, I have seen service on a county council for 10 years and a district council for 12 years and was leader of a local authority. Many of my colleagues have had similar experience.
Whether in relation to local government or central Government expenditure, my basic philosophy is that we should not any more than is necessary tell other people how to spend their money. I prefer the individual to keep as much of his or her own money as possible. I prefer central Government taxation to be as reasonably low as possible, taking account of the need for certain public expenditure. The same applies to local government expenditure. Local authorities should allow the people within their areas, within the constraints of providing essential services, to keep as much of their money as possible. Some may say that that is a hackneyed Conservative policy, but it is my basic philosophy.
Some people take a different view. In central Government they think that they know best, that they should incur higher Government expenditure and tell people how their money should be spent. Many people associated with local government take the same view—that they know better how to spend the money of local ratepayers or business ratepayers. I do not subscribe to that view. I approach local government and central Government financial dealings on that basis. I am no better qualified than anyone else to spend other people's money. Invariably the individual ratepayer knows how to spend his money better than I or any other hon. Member.
Many years ago, the Labour party decided that the percentage given to a local authority in rate support grant should be decreased. That decision was correct. The Labour Government reduced the percentage—

Dr. Cunningham: As the hon. Gentleman has raised this red herring, I must tell him that, when the Labour party came to office, the level of RSG was 60·5 per cent. It increased for two years and then decreased to 61 per cent., remaining at that level for the last three years of the Labour Government. In every year that the Labour party was in office, the percentage of RSG was higher than in any one year of this Tory Administration.

Mr. Powley: A former Minister, Anthony Crosland, said, in referring to local government, that the party was over and that profligate spending would have to cease. As a follow-up Labour Ministers said that the percentage of grant given to local authorities should be reduced—they did not carry that policy all the way through—and that was a wise decision. It was wise also for the Conservative Government in 1979 to carry on that philosophy.
District and county councils and metropolitan authorities should be more responsible for the expenditure that they incur rather than put out a hand to the Government so that they might dole out the taxpayers' money to cover that expenditure. I firmly believe that he

who pays the piper calls the tune. If one depends more and more on central Government for funds to run local government, central Government inevitably must have a greater say in local government expenditure.

Mr. Cowans: To hear the hon. Gentleman talk, one would think that central Government imposed nothing on local government. In fact, 148 Acts have been passed which impose financial spending on local authorities. The hon. Gentleman seems to be making a good case for his being neither in Parliament nor in local government if everybody knows better than he does.

Mr. Powley: I certainly do not pretend that I know better than anyone else. It is my philosophy that preferably individuals should have their own say, and I wish that they had more of it.
Central Government—and this has been recognised by Labour and Conservative Governments—have a responsibility for the effects of overall economic policy on the country. There is no question but that the level of rates in a local authority has a direct influence on inflation and on the well-being of the economy. Therefore, central Government must exercise that responsibility, and the Government are right to exercise control now on the general level of the economy. Indeed, the Labour Government between 1974 and 1979 exercised even more control over local government. Anybody who was in local government in that period, as I was, will know the constraints which were put on local government. The cuts in housing allocation, hospital building and many other services between 1974 and 1979 occurred because the Government had a responsibility for the economic effect of all spending, in particular local government spending.
I turn from the generality of my remarks to my area of East Anglia where there are considerable problems. I apologise for referring to the time when I was in local government, but one draws on one's own local government experience. In East Anglia, we suffered when regression analysis was put into operation. In general, it seemed that the sparse areas with increasing populations received fewer resources while those areas with declining populations, particularly the urban areas, received more resources. That appeared to be patently unfair. It had a disastrous effect in East Anglia. East Anglia is a fairly populous area—indeed it has a growing population. Here I am critical of my own Government, because, in my opinion, they have not sufficiently restored the effect of regression analysis.
In Cambridgeshire, in Suffolk, which is my old county, and in my county of Norfolk, there are three very efficient authorities which are traditionally low spending. Given the target and penalty system which has been in operation, of which I am critical, those authorities have suffered because of their efficiency and low spending. Where targets have been put into operation based on previous expenditure, which in many areas has been profligate expenditure, they have benefited. Where targets have been based on authorities whose expenditure generally has been much lower and more efficient, counties like Norfolk have suffered because of the system.
The efficiencies and economies of counties in East Anglia such as Norfolk must be taken into account more realistically to reflect the economies which they have made in the past so that they are not repeatedly penalised. There is a limit to the number of economies that can be


made. Whatever criteria one takes, East Anglia has been economical. It has accepted the realities of financial discipline, and does not deserve to be penalised again for its economies while observing that the Government appear to be supporting authorities which have incurred increased expenditure and in which greater economies could have been made. I therefore make a plea for the abolition of the target and penalty system and for a greater recognition of the regression analysis as it initially operated.
In East Anglia one can also see the difference between the services of a county authority and those of a district authority. Norfolk has Norwich in its centre. Norfolk administers essential services such as education, fire and police, in all of which economies have been introduced. Norfolk does its best to privatise its services. It looks for more efficient ways of doing things and endeavours not to engage in profligate spending, which is to its credit. However, Norfolk, like many other shire counties with cities at their centre, observes a city like Norwich engaging in profligate and unnecessary spending. When my own district council of Norwich wastes money on promoting CND or other such oddities, although this is not the same scale of spending as that in which Norwich has to engage, Norfolk realises that it is being economical at the expense of another authority in its area which is profligate and wasting ratepayers' money. That is not good enough.
The Government, through their allocation system, must recognise that it is those district authorities like Norwich which engage in profligate spending which need to be penalised, at whatever level the spending happens to be, because they are getting away with it at the expense of counties like Norfolk which administer essential services.
Some way must be found in the rating system to remove business and commerce from the political element of rate fixing. I do not know the Government's view on this, but I believe that commerce and business should make a contribution to the services which an authority rightly needs and of which it rightly takes advantage such as the fire service, the police service and the security services. However, I do not believe that any business or commerce should make a contribution to the profligate spending patterns of other authorities in the area. There is no reason for business or commerce in the city of Norwich to contribute, say, to expenditure on CND, which my authority loves to support.
I believe that there are other elements to which business and commerce should not contribute, and these should be taken out of the district rate. High rates cost jobs. I know that this is disputed in some quarters, but I have no doubt that that is the case. I ran a small business in Cambridge for 24 years. I have talked to my colleagues, and I have my own experience on which to make a judgment. There is no doubt that high rates cost jobs. Local authorities must recognise—and unfortunately Norwich has a high unemployment problem—that an efficiently-run and low-rated local authority attracts business and commerce. There is no doubt in my mind but that that is the case. We want to attract business and commerce to my constituency, but that will not happen if the local authority levies too high a rate.
Rate capping has had the right effect. In the past, the ratepayers of Norwich were used to rate increases of 10 per cent., 15 per cent. or 20 per cent., but thanks to rate

capping and the discipline placed on that authority, the increase can now be 4 per cent. or 5 per cent. or nothing at all. Rate capping has had the desired effect, at any rate in some areas.
In my area, the district council has moderated its expenditure. The past Lord Mayor, Councillor Leonard Stevenson, said that if the Rates Bill ever became law he would resign. That legislation has now become law and is having a good effect, rather than the disastrous effect that Councillor Stevenson predicted. However, he has not seen fit to resign, and that gives the lie to his integrity.
Norwich city council has a bad council housing record. It tried to resist the 1980 Act which gave local authority tenants the opportunity to buy their own homes if they wished to do so. A commissioner was put in to ensure that the authority complied with the law. Thankfully, it has seen some of the light in that it is now co-operating within the law and is selling local authority houses. However, Norwich's housing policy has not been good for the people of the area. The authority has been so inefficient that there are 600 empty council houses in the city. If the rent for each house is, say, £15 a week, and that is multiplied by 600, and then by 52, that will show the sums of money that are being wasted by the local authority simply by allowing 600 council houses to remain empty.
The local authority may argue that it has a very long waiting list—about 4,000 people, 3,000 of whom are single. But my own son is eligible to go on that waiting list, even though he lives at home and has no housing need. Therefore, waiting lists are not necessarily an indication of housing need within a local authority area. Any local authority can go a long way towards resolving its housing needs so long as it gets away from the idea that it can be resolved simply by building more and more council houses. That will never be the case.
Local authorities should look beyond the objective of owning as much of the property within their areas as possible. Instead, they should look to owner-occupation and to giving local people the freedom to choose. Our housing problem could then be resolved much more economically and efficiently and at less strain on ratepayers' and taxpayers' resources.
I hesitate to comment on Labour's alternatives. The Labour party does not believe in rate capping or in penalties. It believes in favourable treatment for Labour local authorities and in profligacy. Where will it all end? The Labour party knows that what it says cannot be put into operation. When it was in government it put those policies into operation and had to introduce economies.
The economies introduced by the present Government have resulted in a sounder basis on which local authorities can operate. I sincerely ask the Minister to look at the points that I have raised with regard to those local authorities that have operated economically.

Mr. Simon Hughes: So predictable are the routines of the House that I have checked and discovered that we went through this ritual a year ago minus a day to the moment, and I was called to speak a year ago minus a day minus three minutes to the moment.
We are now at the time of year when we look back on what has happened to the Government's predictions, and today's debate takes us over the past electoral year. On this occasion, this is unusual for one reason. I have a feeling


that the Government's defence of its case today is rather like the Government arguing the case for the nationalisation policies of the right hon. Member for Chesterfield (Mr. Benn) before the European Court of Human Rights, because we are likely to hear next week that the Government do not believe in targets anyway and that they will change the system of finance. In other words, they will be putting forward a correction to a system that they can no longer support.
It will be recalled that when we met just before the summer recess last year there was on the horizon the first of the two reports of the Audit Commission. We had only the leaked document before us, and I do not blame the commission for that. I well remember the hon. Member for Copeland (Dr. Cunningham) and others—I think that I added to it—taunting the Secretary of State with the fact that it was likely that he would be criticised during the summer. The right hon. Gentleman made great play of the fact that the report was only a draft, but the substantive document was not all that different. It came out on 30 August and was critical of the system of setting expenditure assessments and target figures for local authorities under which if authorities overspent they would be penalised according to a rapidly escalating graph. That had bizarre implications, one of which was that some people ended up with nothing at all. It also meant that one penalised other authorities, often previously Tory-held shire counties, that were not overspending as much in the first place.
Last August, the Audit Commission, when reviewing the grant aid system for local authorities, came to the conclusion that major changes were now desirable. It found many things wrong with the system, such as unnecessary uncertainties and the fact that reserves had been built up unnecessarily. Perhaps most important of all, it came to the conclusion that:
Because some information on local needs is often inadequate and that on local resources is out of date, serious distortions result … The introduction of targets partly related to past expenditure has encouraged some authorities to spend more to secure more grant, a perverse incentive which the present system was designed to avoid; and the gap between targets and grant related expenditure is generally widening.
No one suggests that the Government should not determine the amount of money available to local authorities. All Governments must retain that power. But the hon. Member for Norwich, South (Mr. Powley) will know that one of the criticisms of the present Government is that they have imposed far more rigorous restraints on local authority expenditure since 1979 than on national expenditure. That may be a criticism of their own public expenditure policy which the electorate does not seem to think is particularly appealing.
Although the two sets of figures are getting closer, it is clear that the Government have been seeking to screw down the local authorities—which deliver the front-line services—more than they have been able to screw down themselves.

Mr. Waldegrave: That is not really a fair point to make. Our 1979 manifesto, quite straightforwardly—it was repeated in our 1983 manifesto—gave a set of priorities. The priorities on which we were elected had at their centre defence, the Health Service and pensions, as protected programmes, and law and order. The principal services on which we promised growth happen to be in that category, but the principal service in which the client

group has dramatically declined—education—happens to be a local authority service. That fully explains the discrepancy.

Mr. Hughes: A Labour Member has muttered to me that that is the Government's new line—that pensions and the Health Service will have more money and that everything else will suffer. I expect that in real terms that is true—[Interruption.] Of course that is true, but it is not satisfactory. Employees on my local health authority were told only the other day that 350 of them are likely to be laid off. That includes doctors, nurses, ancillary staff and specialists in Guy's hospital and in others. Clearly even that policy is not acceptable.
Last year, this debate was opened by the Secretary of State who is not here today because he is in Cabinet Committee. That, of course, is a perfectly valid reason. It may be that one of the things to be grappled with is how one replaces the present system by the system we are to hear about next week in a way which complies with the Government's general policy of continuing to screw down local government expenditure. He has had as much criticism about that over the past year from his own hon. Friends as he has had from the Opposition.
The second report of the Audit Commission issued on 2 April this year said something similar and reached the similar conclusion to the first. It was a report by an independent official on the operation of the rate support grant system. It said:
The addition of a regime of targets and penalties unrelated to objectively assessed spending needs, but designed to restrain spending, has detracted still further from the original purposes of the system, to the point of making its sophistication worthless.
To show how worthless it is, I will take some examples.
The Minister will know that the Government's record of arguing that local expenditure should be cut and that the system is fair has failed abysmally to convince the electorate. I shall take two obvious examples. The first relates to parliamentary by-elections, of which there have been eight since the general election. The Tory vote has gone down in each of them. In six of the eight it has gone down by more than 10 per cent. The Labour party vote has gone down in four and up in four, but never by more than 10 per cent. either way. Our vote has gone up in seven, and in six of those it went up by over 10 per cent.
In county elections, local services were clearly what people were voting about. I do not want now to labour the point, but the Labour party lost five out of 10 of the authorities it held. But the Tory party, as the Minister knows, for the first time in its history lost control of the Association of County Councils, and, instead of the majority of the shire county councils being run by the Tories, the Tories are now a minority group on the ACC.
In passing, I must add that it is not true to say that we more often support the Tories in shire counties than we support the Labour party. In Cheshire and Shropshire and originally Warwickshire, we supported the Labour party. In places like Essex, Hertfordshire and Humberside, we have supported the Tories. In three places—east Sussex, Hampshire and Oxfordshire—the Labour party put the Tories in, much to the chagrin of many people. In two places the Tories put Labour in. Let it not be imagined that in this new three-way balanced political scene it is only the alliance which is willing to put in its opponents. The


Labour and Tory parties are now deciding that they often would prefer to see one or the other in power rather than have us in power.

Mr. Jack Straw: The hon. Member is talking about the great election successes of the Liberals and their junior partners the Social Democrats, whose members have been conspicuous by their absence throughout this debate. I am sure that it is embarrassing to the hon. Member for Southwark and Bermondsey (Mr. Hughes), who dislikes them perhaps even more than many of us do. Will the hon. Gentleman explain what happened to the Liberal-SDP vote in the county elections? While it is true that compared with 1983 the Conservative vote collapsed, it is also true that Labour's vote went up by almost 10 per cent. Compared with 1983, the Liberal-SDP percentage share of the vote went down a little. Why did the Liberals and the SDP do worse in the shire county elections than in the general election?

Mr. Hughes: I thought that the hon. Gentleman was about to make a 100 per cent. correct point, but he tripped at the last fence. I anticipated his questions and have the answers to hand, supplied by the research department of the Library. Yes, he is right in saying that in the shire counties the Tory vote went down from 50·2 per cent. to 38·4 per cent. He is also right in saying that the Labour party vote went up from 21·4 per cent. to 30 per cent. As he said, that is a rise of nearly 10 per cent. But he is not right in saying that our share went down, because the figure is exactly the same, at 27·9 per cent.
I will not rise to the bait of saying why there are no colleagues of mine here from the other party in the alliance, except to say that I have no doubt that they trust me to argue the case for both parties because we are agreed on the subject. An interesting development on the political scene is that the hon. Gentleman's party now argues votes and percentages and not seats. I look forward to the natural consequence of that which we will no doubt have to discuss after the next general election.

Mr. Straw: Given that the hon. Gentleman's party subscribes to proportional representation, will he explain why on the hung council in Wiltshire, when the Conservative party proposed proportional representation for committees, the SDP and the Liberals categorically refused to accept it because it would have undermined their power?

Mr. Deputy Speaker (Mr. Ernest Armstrong): If the hon. Gentleman follows that line, he will be getting away from the debate on the rate support grant. Let us get back to that subject.

Mr. Hughes: I will tell the hon. Gentleman later. I accept your stricture, Mr. Deputy Speaker. There is a very easy answer, but I shall deal with it in another way.
The debate has shown up the anomalies of the system by way of some very bizarre examples which I want to put in the context of the overall figures. The figures show that local authorities will overspend their targets this year by about £278 million. That is about 1·3 per cent., a relatively small amount. But it means that over £500,000 will be incurred by way of penalties lost to the local government budgets. That will affect a considerable number of local authorities. It will affect 19 out of 46 shire and

metropolitan counties which will be penalised and will lose money, and 14 out of the 32 London boroughs, including, as I said to the Minister, four Tory-controlled boroughs. They would not incur the penalty if they honestly believed that they could get below the target, especially if they are seeking to uphold Tory policies on strict budgetary control.
Twenty-five out of 36 of the metropolitan districts will incur penalties, and of the other districts about 60 of all political species of authorities will be penalised because they have chosen to spend a certain amount of money. In their case, it is an overspend of about 3 per cent., but for that they will lose 12 per cent. of their block grant.
There are some very bizarre distortions. How can the Minister justify them? How can he justify a penalty of £17·7 million on an overspend of £10·1 million in Brent when surprisingly—and this redounds to the benefit of some of my constituents—in Harrow the penalty is £3 million on an overspend of £1·5 million and yet in Southwark there is less than half of that penalty, £1·4 million, on an overspend of £1·6 million? How can anyone justify a system of swings and roundabouts which penalises certain types of authority to such an enormous extent? As the Government know, it is not just the inner city authorities which suffer, although most of them suffer most. I hope that whatever system the Government come up with next week will recognise that with cuts in rate support grant, if they do not find substantial amounts of money for the inner cities in which the elderly are most concentrated and services the most run down, they will preside over a further decline in what used to be the power houses of the land.
The shire counties, too, are affected. As the hon. Member for Norwich, South pointed out again today, the present system revolves around special pleading. When the Government announced the figures last year there was a great baying from Tory Back Benchers from Warwickshire to the south-west asking the Government to let them off the hook. The Government did not oblige sufficiently and the Tories lost many seats as a result. We do not want another system geared to special pleading. We must have a system that treats everyone fairly.
Sadly, in the past year several authorities have played into the Government's hands. The hon. Member for Dulwich (Mr. Bowden) represents the southern and leafier end of my borough. Southwark is both rate capped and Labour controlled. That authority, with others, went through the process of arguing that it could not comply with the rate-capped limits and then eventually set a rate. It certainly came within the category to which the Minister referred. Intolerable scenes of violence and viciousness put horrendous pressure not just on elected members of the council but on members of the public who through much publicity had been invited to attend the rate-making meetings, of which I believe there were in the end about 10. Sadly, the Labour party in Southwark played into the Government's hands. Having cried wolf and said that it could not set a rate, the council eventually gave in. Other authorities did the same.
A leader in The Guardian a few weeks ago made the case for local authorities having more money and being able to argue the case for money with the Government without all the derogation and restrictions that now apply and without the Government being able to say that because a council cried wolf last year and then managed to make


ends meet it will be penalised even more severely this year when the Government know that the authority has used up most of its reserves. The Guardian said:
Yet in many ways the most culpable of the councillors are those who knew all along that the strategy"—
the anti-rate-capping strategy—
would fail, but who never said so in public, preferring to go along with it either for opportunist personal advancement or in order to set up a witch-hunt against more cautious and realistic Labour councillors and leaders. Into this category must be placed, for varying reasons, Mr. Ken Livingstone of the GLC, Mr. David Blunkett of Sheffield, Mrs. Margaret Hodge of Islington and Ms. Hilda Kean of Hackney.
I would add to that list Mr. Tony Ritchie of Southwark.
The Guardian continues:
Some of these councillors have done very nicely out of this game. Some have got their parliamentary nominations. Some will soon do so. Others, notably in the London boroughs where elections are due next year, are using the betrayal to launch a purge of councillors who voted to set rates. All of this has lots to do with careerism and lots to do with internal Labour politics. But it has precious little to do with either a council's responsibility to get the best deal for its local people, or with Labour's national need to present a politically credible image to voters who have previously deserted the party at election time".
If the hon. Member for Liverpool, Walton (Mr. Heffer) catches your eye, Mr. Deputy Speaker, he may be able to confirm that the deputy leader of Liverpool city council and other members of that council wanted to set a rate of 20 per cent. but the city Labour party said that there must be only a 9 per cent. rate increase, resulting in enormous deficit budgeting. Liverpool clearly deserves a considerably greater grant-related expenditure assessment than it has, but it is financial suicide to bring about a reduction in grant of about four fifths by way of penalty. That is kamikaze politics. Many good, long-serving council officers have been ringing my colleagues and, no doubt, members of the Labour party in Liverpool saying that if that policy continues council officers will lose their jobs. Such a policy is folly indeed.
It is the duty of local authorities to argue against the Government but, more importantly, it is their duty to provide local services as efficiently, competently and munificently as possible. I hope that the lessons of the past year will have been learnt by both the Government and the Labour party. I hope that the Conservatives will never again lumber us with a system of targets that are clearly unattainable by most authorities, including Tory-controlled authorities. I hope, too, that the Labour party will not make a great song and dance about noncompliance purely for party political ends and cost ratepayers hundreds of thousands of pounds, only to give in eventually as it intended from the start.
On a day, which the Government will live to regret, when we have heard that the foolish and ill-conceived measure to abolish the GLC and the metropolitan counties has received Royal Assent, I have received a copy of an internal document from County hall. It is from the chair of the transport committee to Nick Lester of the Public Transport Campaign Unit. The letter, dated 28 June, refers to issue No. 2 of a newsletter on public transport in London put out by the GLC last month and entitled "LT in Exile". The letter requests "Dear Nick" to "See attached." The attached newsletter refers to a complaint that I made about the escalator at Rotherhithe tube station. The letter continues:
Please avoid publicising Simon Hughes. In the past when he was invited to the wreath laying ceremony at 55 Broadway"—

that was to do with the Government's demolition of London Transport—
I was heavily criticised by Labour MPs and activists in the Bermondsey CLP.
The writer concludes with his usual flourish:
Yours for Socialism, Dave".
He then adds the following postscript, just to make things clear:
No blame. It's my fault for not proof reading it!
I am sorry that the Labour party has to go to such lengths to avoid publicising me, but it does its own publicity no good when it helps the Government—on a policy that we should be united in opposing because the Government do not want to listen to the views of local authorities—by publicising its own folly instead of making it clear that the Government and their policies are primarily to blame. The sooner the system is changed—next week, we hope—the better.

Mr. Jack Thompson: On a point of order, Mr. Deputy Speaker. I seek your help and guidance on an important component of today's debate. My point of order concerns the accuracy of the information given in the report. In the table on page 27 a figure of £111,556,000 is given for Northumberland. I have checked today with the treasurer's department of Northumberland county council and I am informed that that figure is about £1 million too high. The treasurer's office checked with the Department of the Environment, which has admitted that the figure is too high and that it is the Department's error. If that is so, may we question any or all of the figures in the document, as they are important in terms of our contributions to the debate?

Mr. Deputy Speaker: That is not really a matter for me. The Minister has heard what the hon. Gentleman has said and will no doubt make appropriate comments at the end of the debate.

Dr. Cunningham: Further to that point of order, Mr. Deputy Speaker. This may not be a matter for you, but it is an important matter for the House. We are being asked to approve the report and the figures set out in it, but the Department itself has admitted that the figure for Northumberland county council is wrong. For all we know, other figures in the report might be wrong.
The Secretary of State for the Environment sent me a letter dated 11 July 1985 about the supplementary report for 1982–83 which was presented to the House and then withdrawn because it contained an error in respect of GRE for Dudley. In that letter the Secretary of State said:
The extent of the error is minimal, but since I intend this Report to be the final one for 1982–83 … I have decided that the Report should be re-made and re-laid.
The report was reprinted and relaid.
If what the Secretary of State described as "a minimal error" requires a procedure such as that, it cannot be right that the House should be asked to approve this report, which contains an error of about £1 million in respect of Northumberland county council. The fact that the error has come to light today leads us to question the validity of other figures in the report.
My hon. Friend the Member for Wansbeck (Mr. Thompson) has had the error confirmed by Northumberland county council, and the Department has agreed. Further consideration of the report should not take place and the Minister should withdraw it, have the error corrected, have other figures checked and re-present it.

Mr. Kenneth Baker: The hon. Gentleman is right about the final report for 1982–83 and the error concerning Dudley. As we had hoped that it would be the final report, we thought it right to withdraw it and table another one, which was considered by the Joint Committee on Statutory Instruments this morning. As for the 1985–86 report, if there is an error concerning Northumberland, I am glad to say that I have been advised that there is a procedure which allows it to be taken into account. The hon. Gentleman knows that there is a series of reports and there will be a second supplementary report later this year. In that case, the error, if it is an error, can be corrected. The point is that Northumberland will not suffer.

Mr. Jack Thompson: Further to the point of order, Mr. Deputy Speaker. Today's debate is based on the figures presented to us. The £1 million in respect of Northumberland will colour my attitude.

Mr. Cowans: Further to the point of order, Mr. Deputy Speaker. The Minister for Local Government said that he had been advised. The House is entitled to know when he was advised. One alteration to one set of figures has a knock-on effect on all the other figures. I do not know how anybody can debate the report when every figure in it will be altered by that knock-on effect as a result of this efficient Department getting it wrong by one million quid. These are the people who are talking about local authorities. Surely the Minister will have the courage to say, "I am wrong. We will adjourn the debate until we get it right." Perhaps he will acknowledge that the Department is not as efficient as the local authorities it is trying to destroy.

Mr. Simon Hughes: Further to the point of order, Mr. Deputy Speaker. We are being asked to agree the determination of certain figures for a list of authorities of which Northumberland is one. The Minister cannot say that he will make an adjustment, because, if a figure is wrong, it should not be in the report. Only a few weeks ago the High Court found that there had been an incorrect figure in regard to Hammersmith and Fulham and quashed it. If there is an incorrect figure in the report, it is likely that the matter will have to go back to court, because we cannot undo what we do if we approve a figure today. We could deal with Northumberland later in some way which the Minister might think of, but we should not be asked to vote when there is a risk of the court finding our action invalid.

Mr. Reg Freeson: Further to the point of order, Mr. Deputy Speaker. If the Minister is unwilling to act, we need your guidance. The Minister said that Northumberland will not suffer because the figures can be adjusted in a later submission. No doubt the same argument could be applied—it would be by him—if there were queries on other figures. We might learn of such figures later. It is good if Northumberland, or any other authority, will not suffer, but this is an important matter for the House. The House is being asked to approve a report. If it is not correct, the House cannot endorse it. It does not matter whether other queries might emerge. We cannot be asked to vote on inaccurate figures.

Dr. Cunningham: Further to the point of order, Mr. Deputy Speaker. I have submitted that there is an error in the report. The Minister was equivocal and said that there may be an error. Our information is that there is

undoubtedly at least one error in respect of Northumberland county council's GRE. My hon. Friends have said that that error has implications for other figures in the report and for other authorities. It cannot be in order for the House to be asked to vote on and to approve a report which we know contains at least one error.
Several choices are available. You could suspend the sitting, Mr. Deputy Speaker. to give Ministers time to sort this mess out and to advise the House of their intentions. The Minister could say now that he intends to withdraw the report and retable it later. I strongly submit that we cannot vote on the matter, as that would not be in order.

Mr. Deputy Speaker: These are important matters and I have listened carefully, but I cannot adjudicate on the accuracy of figures presented in the report. It is not a matter for me. The arguments being used are arguments for voting against the report.

Mr. Cowans: On a point of order, Mr. Deputy Speaker. This is an important matter. May we have an assurance from the Minister that all of the other figures are correct and will not be amended in any way if we continue to debate the report? So far, we have had no assurances. We know that one figure is wrong. It was discovered, but the House was not informed. Are any more wrong? Have the figures been checked? The error must colour the whole of the report. Surely the Minister will stand up and say whether his report is right or wrong.

Mr. Deputy Speaker: Order. The hon. Gentleman is asking for assurances from the Minister. With great respect, it is not a matter for the Chair or a point of order.

Dr. Cunningham: Further to that point of order, Mr. Deputy Speaker. I must press the point, because it is a matter for the House. You say that the matter is not for the Chair, but I cannot see how a submission on a point of order that the House is being asked to approve a document which is in error is not a matter for the Chair. Surely it is a matter for the order of business in the House. The Minister did not refute our submission about an error in respect of the figure for Northumberland. Indeed, he was equivocal about it. Given the array of senior officials present to advise him, I cannot believe that he does not know that there is an error in the report. I put it to both you and the Minister that the debate should be adjourned to give the Government an opportunity to consider their position in the matter, and the Minister an opportunity immediately to seek the leave of the House to make a statement about the facts and to withdraw the report, if it is in error, as I believe it is.

Mr. Kenneth Baker: Further to that point of order, Mr. Deputy Speaker. I support entirely what you have said. I understand that in the past the House has debated supplementary reports of this nature when mistakes have been discovered. There is a means by which, under the procedure on supplementary reports, such mistakes can be corrected. If there has been a miscalculation for Northumberland, I assure the House that it will be taken into account in the next supplementary report. I hope that the House will now be able to proceed with the debate.

Mr. Terry Fields: Further to that point of order, Mr. Deputy Speaker. I implore you to consider the matter far beyond parliamentary activity. As a result of decisions taken here today, Liverpool city councillors—

Mr. Deputy Speaker: Order. The hon. Gentleman must put his point of order to me.

Mr. Cowans: Further to that point of order, Mr. Deputy Speaker. For the protection of hon. Members, would you accept a motion, That further consideration of the report be adjourned until such a time as the Secretary of State can substantiate the correctness of the other figures?

Mr. Deputy Speaker: Order. I cannot accept such a motion. Clearly, the hon. Gentleman has been in touch with his authority, but I cannot adjudicate on the accuracy of the figures. I understand that it is possible in supplementary reports to correct figures, and I cannot accept the motion. Therefore, we should proceed with the debate and allow hon. Members to make their points.

Mr. Patrick Ground: The hon. Member for Southwark and Bermondsey (Mr. Hughes) accepted the need for at least some national control of local government expenditure. He criticised the method being used by the Government, but did not say how he would change the system or what he would put in its place. I was disappointed that he did not acknowledge the benefits to the people of Southwark arising from the degree of national control of local government expenditure that has been derived from legislation, or some of the benefits mentioned by my hon. Friend the Member for Dulwich (Mr. Bowden).
One of the functions of the 1985–86 report, as set out in the first paragraph, is to make changes to the grant-related assessment of local authorities so that they are based on actual capital allocations rather than estimated allocations. Will the Minister look at the machinery for making those changes, and introduce some means of mitigating their effect when an authority is placed in an awkward position through no fault of its own?
Both the Conservative minority and the Labour majority in the Hounslow authority are disturbed about the way in which the changes have been made in the report. As I understand it, two groups of officials at the Department of the Environment deal with local authority capital expenditure. One group consists only of Department of the Environment officials and is concerned with capital expenditure as part of its work on calculating the rate support grant. The second group has contact with other Government Departments, deals with bids for local authority capital expenditure, and is responsible for allocating the sums resolved by the Government in the PESC White Paper.
In December 1984 both groups made recommendations to the Government, and the Government made two announcements within about a week of each other. The first was about the rate support grant settlement, and the second was about capital allocations. On the basis of those announcements the London borough of Hounslow and other authorities made their budgets and rates. Two months later in June Hounslow was informed that its grant was to be reduced by no less than £1·1 million because of the difference between the assumptions made in the rate support grant settlement of 11 December 1984 and the capital allocations which the Department of the Environment announced about a week later. Having made its rate on the basis of the Government announcement, the local authority is in an extremely awkward position. The sum of £1·1 million is considerable for an authority where

the product of a penny rate is £490,000. The local authority could not have known between December and June that the two bodies from the Department of the Environment were making different assumptions on capital expenditure for Hounslow.
First, there is room for some improvement in communications between those two groups of officials. That would undoubtedly be helped if in future the Government made greater efforts to make the necessary decisions at the appropriate time so that the officials could operate as near as possible on the same basis. Secondly, some warning should be given to local authorities when it is discovered—it must be known within the Deparrment—that different assumptions are being made for rate support grant calculations and capital allocations. Authorities would not then be put in such an awkward position over such a substantial sum. Thirdly, there should be a temporary safety net for authorities placed in such a position, whereby the loss of grant should be limited in any one year to the product of a penny rate. On page 8 in paragraph 20 of the Rate Support Grant Supplementary Report (England) 1982/83 it states
The Secretary of State is concerned that these changes should not lead to severe mid-year grant losses.
In that case, he imposed a temporary safety net such as I have described.
I hope that the Secretary of State is still anxious that the changes in this report should not lead to severe mid-year grant losses. I urge him to follow the precedent set for the 1982–83 report with regard to the London borough of Hounslow, which I believe is one of the authorities worst affected by the anomaly.

Mr. Eric S. Heffer: The Minister referred in his opening statement to the position in Liverpool, and suggested that the city council is not acting responsibly. I and my Labour colleagues from Liverpool believe that the council is acting perfectly responsibly. As I said earlier, the target for Liverpool is £220 million. If the city council kept to that target, it would be forced to lay off up to 5,000 or 6,000 workers. It would also be forced to cut local services. Liverpool city councillors, the people of Liverpool and the work force there believe that that is unacceptable.
Merseyside has one of the highest concentrated unemployment levels in the country. Most of our constituents suffer from unemployment that is unheard of south of Birmingham. In one or two constituencies, unemployment has reached between 40 and 50 per cent., and in most of them it stands at between 27 and 30 per cent. Our people are suffering terrible hardship. The majority of people who live on some estates exist on benefits of one sort or another. Those who wish to know about misery, poverty, unemployment and the conditions in which people must live under this Government should come to Liverpool to see for themselves.
During the past few years, 60 per cent. of the industrial base in Liverpool has disappeared, but not because the workers are lazy or wish to live on charity, as one hon. Member had the audacity to say the other day. On the contrary, they are hard-working people who are crying out for employment so that they can lead dignified lives. That is the background to the stand taken by Liverpool city councillors.
The villains of the piece are not the city councillors, who now face possible bankruptcy and disqualification. The villains are the Government and those who accept the policies and ideas of the Prime Minister and her Ministers.
I draw to the attention of the House the report of the Comptroller and Auditor-General, which was ordered by the House to be printed on 2 April 1985. At paragraph 4.65 on page 24, it states in relation to the rate support grant:
Under the previous RSG system the proportion of total relevant expenditure met by grant had remained constant at 61 per cent. for a number of years up to 1980–81.
That is true.
Local authorities in areas such as Liverpool used to receive a decent rate support grant. However, the previous Liberal and Tory coalition council in Liverpool did not increase the rates following the improved rate support grant that it received from the Labour Government. It kept the rates down, and boasted about the fact throughout the city. It did not improve services, which meant that when the Labour party took power last year and wished to improve the services it immediately ran into difficulties with the Government's penalties. Labour councillors are called villains, but the real villains are Ministers and the previous Liberal-Tory administration that controlled Liverpool.
The report from the Comptroller and Auditor-General also states:
The reduction from this figure to the latest estimate of 48·3 per cent. for 1984–85 means that the proportion left to be borne by ratepayers has risen from 39 per cent. to 51·7 per cent., an increase of almost a third or about £3 billion in cash terms for 1984–85. Over the same period the average rate poundages for domestic ratepayers rose from 100·1p to 160·1p, an increase of 60 per cent., and for non-domestic ratepayers from 117·5p to 178·7p, an increase of 52 per cent.
The report makes this important point:
These increases can therefore be attributed more to the reduction in the proportion of Government grant than to increases in local authority spending: and unless and until the level of central government support is stabilised again it will be difficult for local electors to distinguish how far changes in rates should be attributed to the actions of the local authorities themselves, except in those few cases where the entitlement to block grant has already been wholly eliminated.
Although the Government have said for the past few years that local authorities have placed increased burdens on their ratepayers by spending too much, the report of the Comptroller and Auditor-General shows clearly that the problems have arisen because of Government policy. The Minister cannot say that that is untrue. The Government talk about the terrible wickedness of local authorities, but they are in a Catch 22 situation. They wish to improve services to the community and they must increase rates slightly to do so. Then they are accused of overspending. They are not overspending; they have simply been placed in that position by the Government.
Liverpool city councillors have been unable to set a so-called legal budget because of the Government's policies. I have been given some figures by the council. Its committees have worked out that, to maintain existing services, and taking into consideration inflation and last year's deficit of £6 million, which it must meet, it must spend £258,500,000. That means an immediate penalty on that council of £63 million. The rate requirement would be £204 million, and the rate increase in the city would be 75·7 per cent. With the additional payments that would have to be made, the increase in rates could eventually be

as much as 130 per cent. Even some of the employers' representatives who came to see us recently are constantly arguing that the burden of rates is too high. In their own way, they have made representations to the Government about it.
Can we expect councillors to accept that situation? I do not think that we can, because they were elected on a programme. Two years ago they went to the people of Liverpool and promised to defend existing city council jobs and services, to create additional jobs and to improve services. They have created additional jobs in the construction industry to build houses for the people. Council houses had not been built by the local authority for years. If the councillors accepted Government policy, that activity would have to cease.
The councillors made it clear that they would build houses for rent, and end the threat of privatisation of the city council services. They originally went to the public on that programme. Last year they went to the public again on the same programme and they won. The choice before the city councillors is either to carry out their local mandate to the people of Liverpool or to be dictated to by central Government.
The Government are dictating to local authorities what they should and should not do. We have a centralised, authoritarian force developing in Britain. The councillors have said no to that. There can either be genuine local democracy or centralised control by the Government. The Government are always talking about freedom and saying that they believe in freedom of choice. What choice have the local authority and the local people in those circumstances?
On 26 June, the national executive committee of the Labour party, of which I am proud to be a member, made a lengthy statement on the crisis in local government. It said:
Local government is now in deep crisis. The Tory Government have progressively cut the grant available to local councils.
The national executive also said:
Local authorities everywhere are being ensnared by Tory legislation. And the Tories are now prepared to use the District Auditor to crush those local authorities determined to defend their local communities.
Liverpool councillors are faced with action by the district auditor, not at this stage on the basis of fixing a deficit budget but on the basis of delaying the setting of a rate. Many local authorities as well as Liverpool and Lambeth have delayed the setting of a rate. They could all be faced with the same action by the district auditors, but Liverpool and Lambeth have been picked out so that the Government can say that those local authorities are led by wicked, Left-wing, loony militants, and so on. That is the Government's line. They know that it is not true, but they want to do their damnedest to make the actions of the Liverpool and Lambeth councillors appear to be irresponsible when those councillors are fighting responsibly for the interests of their local people.
The national executive committee of the Labour party said that it
supports the Labour councillors, and calls upon all sections of the Party to offer maximum support to those councillors, in Liverpool, Lambeth, Edinburgh"—
the councillors in Edinburgh are faced with the same problems, arising from legislation operated against them in Scotland—
and other authorities, in seeking to prevent the threatened disqualification and surcharge".


Yesterday the Liverpool Labour Members of Parliament met the Secretary of State. We told him that the Government should give advice to the district auditors. If the Government were intelligent and did not want a confrontation, they could advise the district auditors to have a further look at the problem and see what could be done to overcome it without confrontation.
The Liverpool city council has asked for two meetings so that it can discuss the urban aid programme and rates. I agree with the hon. Member for Southwark and Bermondsey (Mr. Hughes) that we shall soon be hearing of a change in policy in regard to penalties. If there is to be such a change, let us have it now, rather than continuing to put the councillors into a difficult position. The Ministers could discuss the urban aid programme, even if at this stage they did not want to discuss rates. They could discuss in detail what could be done through the city partnership schemes and the urban aid programme to help Liverpool.
Our Liverpool councillors are the victims of legislation that has existed for far too long. When we have a Labour Government, the legislation that is putting councillors into such difficulties must be repealed once and for all. Good honest people must not be put in the position in which councillors at Clay Cross, Camden and St. Pancras found themselves in the past.
In the past, the Government have brought in retrospective legislation on various issues. If councillors are disqualified and bankrupted as a result of Government action, I hope that the next Labour Government will introduce retrospective legislation to deal with those councillors. They are not criminals or people who wish to break the law, but they are being forced to do so by Government policy.
The point has been made clearly by local authorities and by the Association of Metropolitan Authorities in the briefing that I am sure we have all received. I imagine that all hon. Members have received a copy. It states:
The penalties are so severe that the 'marginal grant rates—
that is the cost to the ratepayers of each additional £1 of spending—are
£4·54 in Hounslow, £4·22 in the West Midlands, £3·36 in Birmingham and £3·04 in Liverpool.
That AMA believes that that is entirely wrong, and I agree. Even at this late hour, I hope that the Government will have second thoughts. If they do not, the full responsibility for the uneasy, unhappy and difficult summer that might lie ahead for them and our people will be fully their responsibility and will lie fully and squarely on their shoulders. The fault will lie with the Government and not with the honest, decent and courageous councillors of Liverpool who are fighting for those who elected them.

8 pm

Mr. Derek Spencer: If anyone is minded to accept the advice of the hon. Member for Liverpool, Walton (Mr. Heffer) and journey north to Liverpool, I invite him first to call in at Leicester, which, unlike Liverpool, is a city on the up and up. It is a city of enterprise in which industry and small businesses form a significant part of the economy.
Leicester has done well out of the Conservative Government since 1979. The rate support grant for this year amounts to over £12 million and the inner urban grant

amounts to about £5 million, a total of more than £17 million. That is to be compared and contrasted with the sum that is raised locally in rates, which is £10 million.
It is clear that a large part of Leicester is not funded by Leicester: it is funded by the taxpayer. Who will speak for the taxpayer who has contributed to the rate support grant this year, which is £2·5 million more this year than last? Who will speak for the taxpayer who subscribes to the inner area grant? If that taxpayer is to have a voice, it must be one that comes from right hon. and hon. Members.
The rate-capping exercise which we have witnessed at first hand in Leicester in the past few months has produced three concrete benefits for my constituents. First, it has produced lower rates. If the local Labour party had had its way the rates bill that my constituents would have had to meet this year would have been about twice that which they were eventually set. The second advantage that my constituents will enjoy is a higher rate support grant. The third advantage is a substantial sum for the inner area programme. The amount which Leicester receives for that programme is almost a quarter of the grant-related expenditure.
When I recite these facts to less happy boroughs, they are amazed that we can have such a generous extra subscription from the taxpayer to the city. I can say of behalf of the citizens of Leicester, South that for the most part their money is put to good use in what is a city of enterprise. Indeed, it is evident that it is not a city of gloom and doom. If visitors to Leicester travel on to Liverpool and witness how things are conducted there, I think that they will be able to draw their own conclusions on where they should finally come to rest.

Mr. Powley: Does my hon. and learned Friend recall the extraordinary statements that were made by some local authorities before the Rates Bill, as it then was, became law? They were saying that the Bill, if enacted, would result in wholesale redundancies, the decimation of services and chaos in the streets. Has my hon. and learned Friend seen any evidence of such happenings in his area? The predictions have not come to pass in the area that I represent. Perhaps my hon. and learned Friend will comment upon that.

Mr. Spencer: I shall accept my hon. Friend's invitation and deal with that issue out of order. I can rely on none other than the chief of public relations of the city council, who is not a politician. He is an officer who is paid a salary from the public purse, having been hired by the Labour local authority to advance the anti-rate-capping propaganda campaign. He announced recently that the authority had got it wrong. He acknowledged that many of the claims made in the rate-capping propaganda campaign have not been borne out in the slightest. He and his colleagues were prevailed upon by their political masters to make various claims which, to use his words,
with the benefit of hindsight have not been borne out by events.
I am sure that the same claims were being made throughout the country by other rate-capped boroughs. I have a copy of the propaganda literature which was circulated in Leicester and it is almost identical to that which was to be found wherever else I went. The same literature was being circulated in Leicester, Camden, Southwark and Liverpool. Its message was virtually the same as that which we received from the hon. Member for Walton. We were told:


The Government want to slash services and jobs by over a third. This means a cut of £10 million plus. Cuts of this savagery would affect the services of the city council. For example. housing—reduction in the inner city housing improvement programme. Recreation—closure of three sports halls and two swimming pools. The cancellation of the Leicestershire show and the closure of the Haymarket and the Phoenix. Withdrawal of support for Bradgate Park. Works—severe reduction in refuse collection and street cleaning. Planning—long delays in planning applications. Environmental health—abolish the service for dealing with rats and mice. Employment—abolish the Leicester promotion campaign.
If we examine the reality against the promise, what do we find? Do we find that Leicester has been converted into a stinking heap where refuse is piled up in the streets? Do we find that no work is being done on council housing? Do we find that the swimming pools are empty? Do we find that expenditure on the parks has been cut and that the grass is growing knee deep? We find not one of those symptoms. Indeed, we find, as the Labour council has been forced to admit, that all these services are going ahead in much the same way as they were before the anti-rate-capping campaign began.
There is a two-faced monster in many town halls. One face is speaking inwards telling the truth and one is speaking outwards putting forward a pack of distorted nonsense. The pack of distorted nonsense is along the lines that I have just outlined, but the reality is that the council has been able to discharge its functions without laying off one member of staff.
My hon. Friend the Member for Norwich, South (Mr. Powley) may be interested to know that far from a reduction in staff under rate capping, as my hon. Friend the Member for Leicester, East (Mr. Bruinvels) will be able to confirm, there has been a significant increase, month by month, since rate capping came into operation. At one and the same time, we have been able to have rate capping and the city council has been able to discharge the promises to continue taking more people on to the staff that it made earlier.
We have made a start and rate capping has brought benefits to my constituents. I urge the Government not to give up now just because there has been some squealing in one or two town halls and blood on a few municipal banisters. Now is not the time for the Government to become squeamish, because the blood in Leicester was the blood of the Labour party taking to its heels and running away from its commitment to break the law. As late as 14 February, the leader of the city council said in the Labour newspapers:
We are firmly committed as a group to non-compliance.
When it came to it, at the first whiff of gunfire the Labour party turned and fled. It fixed a rate long before the time limit had expired. It had to send to each ratepayer a certificate of compliance with the Rates Act 1984, which, in its case, was a certificate that it had egg all over its face.
The lesson of rate capping in Leicester is that, once deceptions are practised, the skein of the deception envelops those who seek to practise it.
Although it was possible to fix a rate in Leicester within the time available, with a similar background, similar propaganda and a similar commitment to non-compliance in Camden, where I served five years before the mast before I came to this place, my colleagues found that the Labour party there was not willing to set a rate.
I pay tribute to Tony Kerpel and others of my former colleagues on Camden council who had to withstand a hail of spittle, intimidation and threats at council meeting after council meeting through April, May and into June, not just at the hands of people living in Camden, but at the hands of those bussed in from Lambeth and elsewhere on a so-called battle bus. Is that the responsibility of local government about which some Opposition Members have spoken? Is that local government discharging its obligations to the people who elected those councillors to sit in the town halls on their behalf? I defy anyone to say that that is a proper discharge of is responsibilities.
It was not surprising when Councillor Phil Turner, leader of the Camden Labour party, sent a letter to Camden ratepayers on 3 April saying that the council found it impossible at that time to set a rate. If it found it impossible to set a rate then, am I now justified in saying that I find it impossible to pay it? I should be using words in the way that he sought to do if I were to seek to say that now.
Eventually, on 8 June or thereabouts, Camden council fixed a rate. On 13 June, out went another letter from Councillor Turner saying that on 8 June the council set a rate. It did, but that letter draws a veil over the way in which it was done. It was done through a combination of a few defectors from the Labour party and the Tory party discharging their duty to fix a rate. One has eventually been fixed within the legal boundary.
A loss must have been caused to Camden ratepayers by the late fixing of a rate. It has been said that it would be terrible if, in such circumstances, the district auditor were to pursue the councillors. I say that it would be a dereliction of duty if a public servant such as the district auditor did not pursue them. I, with others, intend to see that the course that I set in motion after the settlement of the dirty jobs strike in Camden on terms that were adverse to the ratepayers, which was eventually referred to the High Court by the district auditor, Mr. Pickell, turns out to be not an isolated case, because, for justice to be done to the ratepayers, matters cannot be left as they are.
If one could say that the anti-rate-capping campaign fought by some Left-wing councils, as well as heightening public perception of the importance of local government—I believe that it has—also informed it better about the true facts of local government, I should have been prepared to chip in as a ratepayer in Camden and Leicester—in the way that I have been obliged to—for that campaign. But, unfortunately, as the public relations officer in Leicester was bound to admit, it has not been information that has been fed to the public; it has been a great deal of misinformation.
Such truth as has emerged from that sorry story has emerged from Tory councillors and Tory Members of Parliament speaking at meetings and trying to put the truth in the face of a hailstorm of misrepresentation. We have done that willingly. We believe that the cause is just and we wish to see the Government go further.

Mr. Guy Barnett: The hon. and learned Member for Leicester, South (Mr. Spencer) has misunderstood, if not misrepresented, the motives that led many Labour councillors, decent and sincere people, to do what they did in the face of the appalling dilemma with which they were confronted. They knew that they had a responsibility to some of the most vulnerable members of


their communities, but they were being prevented from discharging that responsibility by the actions perpetrated by the Government.
In the last debate that we had on this subject, on the Rate Limitation (Prescribed Maximum) Order, on 25 February I accused the Secretary of State and his Ministers of injustice and vindictiveness towards the London borough of Greenwich. I made that charge on the basis of evidence that in my borough, and no doubt in many other local authorities, as is apparent from the debate, the GREA system is arbitrary in its assessment of need and unjust in its effect on grants.
Greenwich is an inner-city London borough with all the problems associated therewith—high unemployment, decaying industry, the need, and the statutory duty, to spend substantial sums of money on maintaining and improving the council's housing stock, and severe social problems. The Government have manipulated the rate support grant system in a way that is unfair to inner cities in general, and London authorities in particular.
Greenwich has been singled out for particularly harsh and unjust treatment. Since 1979, £119 million in block grant and £85 million in housing subsidy have been withheld or withdrawn. This is at a time when the council is faced with increasing demands for its services as a result of demographic and social factors and, in particular, as a result of Government policy.
For example, the increased unemployment and reduced welfare benefits mean that more people living at or below the poverty line make increased demands on council services, housing services and leisure services. Cuts in the NHS lead to a greater demand on the council's social services. The Government, while consistently increasing their expenditure, as has been pointed out, have reduced financial support for local authorities. In 1979, about half of Greenwich's spending was met from taxes. In 1984–85, it was less than a quarter. As the Audit Commission has noted, the Government, and not local authorities, have been responsible for the increase in rates in recent years. In addition, the Government withdrawal of housing subsidy has meant increased rents for tenants.
Greenwich residents are being made to pay higher rates than they should as a result of the Government diverting money paid in taxes to other purposes, rather than returning it to local authorities through the block grant system to pay for local services and to reduce rates. The loss of block grant and subsidies for Greenwich since 1979 is £204 million, and this figure is very much higher if the grant losses of the precepting authorities—the GLC and ILEA—are included. As the House knows, ILEA is the only education authority in the country that does not receive block grant.
Government policy has forced up rates in Greenwich and has restricted the ability of the council to develop essential services to meet the increased needs of Greenwich residents.
The use of GREAs to distribute block grant was introduced by the Government with the stated objective of giving local authorities enough resources to provide broadly similar standards of service while ensuring that ratepayers were being charged roughly the same rate in the pound. GREAs are claimed by Government to be a measure of the expenditure that an authority needs to spend if the same standard of service is to be provided

throughout the country. This is nonsense, and I expect an announcement shortly showing the extent to which the Government know that that is nonsense.
GREAs are not a reliable basis for comparing relative spending levels of different authorities. They have become successively less comprehensible and increasingly unpredictable. Moreover, they are biased, inflexible and based on out-of-date and inadequate data. They are based on mathematical formulas that do not take into account unemployment or urban deprivation. Housing GREAs do not take into account local needs and conditions. Social services GREAs take no account of population changes or demands caused by legislation.
The GREAs for housing and social services were criticised in a recent report by the Audit Commission which stressed that inner city authorities such as Greenwich were suffering because of faulty GREA calculation by the Government. A central failing of GREA calculation, identified by the Audit Commission, is the continued use of inaccurate data. In its recent report on the block grant system, the Audit Commission quotes the old adage, "garbage in equals garbage out" and states that inadequate information in calculating GREAs leads to "serious distortions" to the grant distribution process.
Inner London boroughs are unfairly penalised by the present system, and Greenwich is treated worst of all, for in Greenwich the GREA per head of population is the lowest in inner London. I can illustrate this by reference to social services. Greenwich's social services committee commissioned Tony Travers, research fellow at the North-East London polytechnic, to undertake an independent examination of the Greenwich social services component of GREA. I shall set out his main findings.
First, Greenwich has a relatively low social services GREA compared with broadly similar authorities arid, per head of population, it has been growing less rapidly than social services GREA for inner London as a whole. Secondly, Greenwich has a social services GREA that falls short of its spending by a wide margin. Its GREA is measured in a systematically unfair way. Thirdly, the Greenwich system is particularly disadvantageous compared with that of other London boroughs, which are treated badly enough anyway. This is almost certainly because the borough has, perhaps alone among the other inner city authorities, an increasing population.
In addition, the population numbers of the very young, people over pensionable age and those who are mentally ill or handicapped are relatively high in Greenwich. Social isolation, particularly among the elderly, creates a disproportionate need for social services in Greenwich. Despite this, the Greenwich social services GREA per head has risen less rapidly than elsewhere in inner London. This is only one example of the unfairness of the GREA for Greenwich. Similar examples can be found in respect of highways, housing and libraries.
On top of the block grant system is the wholly arbitrary and subjective system of targets and penalties. Greenwich has been penalised in recent years for spending above a target set by the Government. Although the High Court ruled in 1983 that Greenwich's action in spending above target to provide essential services was lawful, in 1984–85 the Government fined the Greenwich ratepayer approximately £1 for every £1 of expenditure that was 3 per cent. above the arbitrary target set by the Government. The unfairness of this is emphasised when the Government


consistently add to the responsibilities of local authorities and require them to incur additional expenditure, which the Government then penalise them for incurring.
I can give some examples of this behaviour, although I make no comment about the value of the legislation. In social services, the appointment of guardians ad litem under the Children Act, implementation of the Mental Health Act 1983, the Criminal Justice Act 1982 and the Registered Homes Act 1984 all add to the statutory responsibilities of local authorities.
The same is true in housing. There has also been the transfer of responsibility for the administration of housing benefit from the Department of Health and Social Security to local authorities. There is the Local Government, Planning and Land Act 1980, which, in an effort to encourage privatisation and damage direct labour teams, has substantially increased administrative tendering costs to local authorities. New duties have been imposed on local authorities under consumer protection and environmental health legislation. I could give further examples of burdens that are placed on local authorities. Little or no recognition is given of those extra burdens in the way in which the Government treat them financially.
Therefore, at a time when the Government are requiring local authorities—and my local authority in particular—to do more, they are steadily reducing the money available. That I believe to be logically indefensible and hypocritical. It needs to be stressed that the legislation to which I referred is new legislation, imposing additional duties. Because of social changes, increasing unemployment and Government cuts in other public services, the demand for existing services has increased, yet central Government are determined to reduce money available to Greenwich to provide those essential services.
The Government have made no attempt whatever to answer the charges that I made in the House on 25 February. Either the Secretary of State does not care about the situation in Greenwich or he is too embarrassed to admit the faults in the lunatic system that he is currently operating. The Secretary of State, or the Minister for Local Government, has a responsibility sooner or later to come clean and admit that the system that he is operating is unjust to local authorities such as mine, and often highly damaging to the most vulnerable sections of the community who depend upon the delivery of services by those local authorities.

Mr. Roy Galley: There is one important point that I should like to raise about the supplementary report for 1982–83, but in the overall context of some general remarks about local government policy.
It is now nearly 10 years since a Labour Secretary of State said to local authorities, "The party is over," and that unrestrained local authority expenditure would have to be controlled. There have been considerable advantages from Government policies in recent years in terms of better management of local authority resources. The more sensible authorities have accepted the coaxing towards that better management, whereas more rigorous measures have had to be applied to others.
I pay tribute to the management of my local authority of Calderdale for the way in which it has run our services, with no reduction, and within a tight financial budget. It

has used imaginative processes to do so. It is surprising that many local councils have not turned to more vigorous attempts at improving their management techniques. Throughout the country we have seen many examples of where, on certain budgets, by the tendering exercise and by contracting out services—sometimes not even by contracting out, but by the practice of tendering—there have been savings of 10, 20, and even 30 per cent. It seems unfortunate that those exercises have not been undertaken by more local authorities. Those authorities have preferred to stick to their tired old ideology rather than release resources which could be given back to the ratepayer or provide better services for the people whom they represent.
There are many ways in which the private and voluntary sectors, in co-operation with the public sector, can work' together to provide services at a reduced cost to our ratepayers. If, as has happened with the encouragement of more sensible management, certain authorities do not carry out policies that are to the advantage of their ratepayers, it must be for the Government to say that they will be compelled to apply such policies. In the absence of any evidence that some local authorities will be sensible, I hope that my right hon. Friend the Secretary of State will say in due course that there will be tough measures to compel local authorities to put out to tender a wide variety of services.

Mr. Bill Michie: There may be some logic in what the hon. Gentleman is saying, but does he agree that the Government should insist that the public works departments, the direct labour organisations in local authorities, should be able to tender in the private sector, as well as the private sector tendering in the public sector?

Mr. Galley: I do not agree with the hon. Gentleman. That is an entirely different debate. There is no reason why the public sector should go into operation as a commercial company. It is not there to run commercial operations. It is there to give the best services that the ratepayers require at the least cost.
As my hon. and learned Friend the Member for Leicester, South (Mr. Spencer) said, the important factor is that in so many instances services have not been reduced in any way. Complaints arise from time to time about local authority budgets. It is remarkable that whenever local councillors have a pet scheme which they want to implement, somehow or other they can find the money to do so. They will take money for their pet schemes from other projects and then say that essential services cannot be provided because of Government policies.
I take as an example the way in which a series of ill-advised traffic management schemes in Halifax have led to the strangling of the town centre. Resources which should have been available for highway maintenance elsewhere have been denied. More importantly, larger sums of money have been used increasingly for overtly political expenditure by local authorities. I shall keep to West Yorkshire in my examples, as I am familiar with it. In opposing Government legislation for the abolition of metropolitan county councils, West Yorkshire county council spent nearly £600,000 of ratepayers' money, without a by your leave. That money should have been spent on providing services for the people whom the council represents, but it was used for party political propaganda. The council also recently diverted money to a campaign against the Transport Bill.
Leeds city council spent over £100,000 in opposing rate-capping legislation. There are many other smaller examples of purely party political use of ratepayers' money. Money is raised from every ratepayer for the services that ratepayers want, yet it is used for purely party political propaganda. If political parties wish to put forward a particular point of view, they should raise their own money to do so, and there should not be a precept upon the ratepayer.
There is an increasing use of public funds to encourage the Campaign for Nuclear Disarmament. There has been the appointment in Leeds of peace officers and the continuing development of councils' ludicrous nuclear-free zone policies, the production of leaflets, the financing of seminars, and the establishment of peace gardens. Throughout West Yorkshire such activities are increasingly using sums of money which should be providing proper services for the people of the area. I refer also to the "great" Liberation Festival in Bradford, when substantial funds were used to support and enhance several Socialist campaigns, such as the Troops Out movement and the El Salvador solidarity campaign.
I hope that in the next Session of Parliament my right hon. and hon. Friends will present to the House legislation banning the use of ratepayers' money for party political propaganda. There will be problems of definition, but I have no doubt that by using the Independent Broadcasting Authority's code of practice on advertising, which bans from advertising any overt political material, it will be possible to enshrine that provision in legislation.
The supplementary report for 1982–83 makes several corrections to the rate support grant settlement that had previously been agreed. I understand that one correction has not been made. It appears that the Department of the Environment made an error in 1982–83 in the allocation of the non-housing revenue GREA. That error resulted in additional payments being made to London authorities and insufficient money being made available to certain other authorities, including my metropolitan borough of Calderdale. As a result, the Calderdale authority lost £116,000.
That loss resulted, not from any over-spending or inefficiency on the part of the council, but from an error by the Department, and the report makes no attempt to correct that mistake. As the error has been known about for some time, we should be told why the position has not been corrected.
During this year's budgetary exercise the Calderdale budget was set on the basis of perceived GREA rules, and after the exercise was completed the amount available to the local authority by way of grant was about £300,000 less than had been anticipated. It is understood and accepted as part of the game that rule changes may happen after budgets have been set, although that presents difficulties for local authorities. It is hard to swallow the fact that apparently the Department of the Environment can make a mistake—a mistake to which Calderdale council had in no way contributed—and the local authority is penalised as a result. If the Department had not made that error, the council would be £116,000 better off.
My hon. Friend the Minister may say that it is a relatively trivial matter. To Calderdale, a small authority, it is not trivial. That money could have been spent wisely and, with the good management that we have in Calderdale, it would have been spent to the advantage of

the local people. I urge the Minister to reconsider the matter and, if possible, give the money back to the Calderdale authority.

Mr. Bill Michie: Conservative Members adopt double standards. They speak of what is responsible and what is irresponsible. They refer to so-called pet schemes, which they regard as good schemes, and question whether political propaganda is paid for out of ratepayers' money, and they call that disgraceful. I remind the hon. Member for Halifax (Mr. Galley) that the chairman of the Tory party is paid by the taxpayer, because he is on the Government payroll. If that is not a scandal, I do not know what is.
Why criticise councillors over small items of expenditure when an enormous hole exists in the Government's financial strategy? Since 1981–82, local government has suffered tremendous interference from central Government, all in the cause of reducing expenditure because the nation cannot afford it, we are told. Grant reductions have been the main cause of the rate situation that now exists in our cities. Since 1981–82, Sheffield's grant reduction has reached a staggering £240 million.
However efficient one may be in management terms and however much imagination one may have, when that sort of money has been lost, it is difficult to make ends meet. I am sure that any other authority. Tory or Labour, would feel the same when faced with a loss of that magnitude.
The excuse given by the Government is always the same. They say, "We are not against democracy. We must take this action because the nation cannot afford the expenditure." They are saying, in effect, that the nation cannot afford local democracy. As I listened to the hon. Member for Halifax, I thought of the way in which certain authorities can always find money for pet schemes—£2,000 for something here and £20,000 for something there. However small or large one regards such sums, one cannot overlook the Government's biggest pet scheme, a scheme about which nobody was consulted, namely, the new runway on the Falklands. That cost four times the whole of the grant-related expenditure taken away from local authorities since 1981. That runway was built, the Government say, for the defence of democracy, yet we cannot have money for local democracy.

Mr. Galley: How can the hon. Gentleman suggest—as there was a general election in 1983 at which the electorate endorsed the Goverment's Falklands policy—that it was not known that our policy towards the Falklands would be carried out?

Mr. Michie: Will the hon Gentleman explain how it comes about that every local authority that has been rate-capped was elected last year on a mandate or manifesto? He cannot have it both ways. The Government cannot declare one policy for democracy and deny it to local authorities.
To enable Sheffield to adopt any form of local democracy, we are having to spend about £3 to achieve £1 of value. That may not make sense, but it is not the fault of the local authority. No account has been taken of the real effect on services. It is easy to do an accountancy' exercise and come up with attractive figures, but no


revelation has been made of the real effect of the cuts that have been imposed on the less well-off, the immobile, the single-parent families, the homeless, the aged and the unemployed. Many local authorities do not believe that it is a waste of money to spend it on services to help old people to get about and to help single parent families make a decent life for themselves and their children.
Sheffield is an aging city. In 1976, there were 9,000 live births, but by 1981 there were fewer than 6,000. At the other end of the spectrum, at a point after 1986 there will be 110,000 pensioners in the city, almost 20 per cent. of the population. Within that 20 per cent., the number of over-75s will increase by 20 per cent. to a record 42,000, and, of those, the number aged over 85 will increase by 75 per cent. to 10,000.
Such figures cannot be ignored. They will not go away simply because money is short. The elderly are living longer, and while I accept that some of them do not need help, nobody can dispute the fact that such rapidly rising figures must have implications for the social services.
The city also has growing numbers of people out of work. Today, 15·2 per cent. of people are unemployed in the city overall, and in the inner city areas, on large council estates—the same applies to other major cities that are rate-capped—the levels of unemployment are double that. The chairman of the Sheffield budget subcommittee, when trying to describe the hardship that is being caused to the electorate of Sheffield because of the council's difficulty in maintaining services, said:
It is easier for a Rolls-Royce to pass through the eye of a needle than for a Cabinet Minister to enter in imagination the experience of the unemployed.
It is not surprising that, with such high levels of unemployment and poverty in Sheffield and other local authority areas, councillors are becoming frustrated in attempting to carry out their duties. We cannot expect them to fulfil their responsibilities by pretending that these things are not happening to thousands of our fellow citizens. These are the realities of life that they face every day in town halls, in their jobs—if they still have jobs—in their surgeries and at meetings which they attend almost daily. All our great conurbations are affected in the same way.
If the Minister is convinced that the cuts, penalties and rate-capping activities have been painless, I challenge him to agree to conduct an independent inquiry into the needs of thousands of people living in rate-capped areas. I am confident of the result of such an inquiry, if it were truly independent. It would reveal incredible suffering for the less able, the less articulate and the most vulnerable. It would also reveal a sad erosion of the quality of the lives of the majority of people in our towns and cities.

Mr. Peter Bruinvels: This is an important debate in which I should have thought that the Conservative and Labour Members representing Leicester would have participated. Having heard the hon. and learned Member for Leicester, West (Mr. Janner) on a number of occasions on the radio assuring the Leicester people that he would be in the House to oppose rate capping, his absence is surprising.

Mr. Straw: Will the hon. Gentleman give way?

Mr. Bruinvels: The concern of myself and my hon. and learned Friend the Member for Leicester, South (Mr. Spencer) is apparent. We are concerned that rate capping, which—

Mr. Straw: On a point of order, Mr. Deputy Speaker. Will you confirm that it is a convention of the House that a Member who is absent should be informed before he is attacked? Is it possible for you to ask the hon. Member for Leicester, East (Mr. Bruinvels) whether he has informed my hon. and learned Friend the Member for Leicester, West (Mr. Janner)?

Mr. Deputy Speaker (Mr. Harold Walker): The hon. Member for Leicester, East (Mr. Bruinvels) must answer for himself. It is the usual courtesy for an hon. Member who intends criticising another to notify that hon. Member in advance.

Mr. Bruinvels: I am concerned about the allegations about rate capping and what it will do for the people of Leicester and the city council.

Mr. Jeff Rooker: The hon. Gentleman did not tell my hon. and learned Friend the Member for Leicester, West (Mr. Janner).

Mr. Bruinvels: Any letter that I have sent to the hon. and learned Member for Leicester, West is a private matter between myself and my conscience.
On 25 February we heard that all was doom and despondency for Leicester, that rate capping would be terrible, that jobs would go out the window and that many services would be lost for ever. I am happy to report from my visit to Leicester at the weekend, where I live, that Leicester is still doing well. The jobs are still there, advertisements for jobs are appearing, none of the services has been cut and many job notices are appearing in the Labour council's propaganda magazine "Leicester Link".
Councillors are elected to keep rates down, not to increase public expenditure. We can argue about the percentages in any local vote. Because 30 per cent. of the Leicester electorate voted, one cannot say that an overwhelming majority wanted increased expenditure on public services. Many of those who voted in the city and county elections did not pay rates. Those who pay the rates, especially business men, do not have a vote. Why not? Rates in Leicester have been too high and the business men have been driven out of Leicester. They are now coming back because rates are decreasing with the arrival of rate capping. That makes a lot of sense.
It is amazing to see advertisements in the London Underground, saying "Come to Leicester where the rates have been reduced." The Leicester people should be grateful to the Conservative Government for bringing in the rate-capping legislation. The Leicester city council budget has been set; the Government grant has been agreed; the rate revenue of £10 million has been worked out; and the reserves are there. The 2p in the pound that will be saved this year will bring much prosperity to Leicester and its people.
The red covered "Leicester Link", which is the Labour council's typical monthly paper, admits:
The total rate … is down by just under twopence in the pound on last year.
Leicester City Council reluctantly fixed a rate at its March meeting".
"Reluctantly"? The council was going to fix the rate from the first moment. It was not going to fight, because a


number of councillors did not want to be in trouble. They wanted to stand for Parliament in other parts of the country. The councillors did not put their money where their mouths were. It was clear that this was a great whipped-up fear to get the Leicester citizens rushing around, pinning stickers on their buses and lapels and saying, "We shall fight rate capping the whole way." Yet the council did not even lead from the front. It manipulated some of the Leicester people by frightening them about losing their jobs and threatening to close the lovely golf course at Humberstone Heights. I do not play golf, but many people were playing golf on that course at the weekend. That is typical of Labour—it never goes through with its promises.
The scare campaign had some effects. About £65,000 was spent on the campaign and £135,000 is budgeted for this year. The rates legislation saved jobs and many more people are returning to the city.
Robin Treacher, the head of public relations for the city council, said that the council had spent a large sum printing leaflets and had got it wrong. Just like the Islington NUJ, it is a typical case of where the public relations people have been taken advantage of. They had to provide something in which they did not believe. They did as much as they could, scaring some of my constituents and those of my hon. and learned Friend the Member for Leicester, South. I am glad that the Labour councillors could not match that. That was an abuse of the system.
Leicester deserved to be rate capped, and I was delighted that that occurred. The propaganda included pamphlets entitled "Who Pulled the Plug? What Ratecapping Means for Leicester" and pamphlets in Gujarati. I shall not read the Gujarati edition. Not one of the cuts has occurred. No jobs have gone. There has been no reduction in refuse collection and street cleaning, although for some strange reason the men do not like to collect street refuse on Mondays. The inner city housing improvement programme is on target. There has been no cut in benefits—indeed, I admire what the city council has done there.
A large rally was arranged, which I was not able to attend because it was Monday 13 May and the House was sitting. Not many people went there. The Peace Action Group, which is operated through Leicester city council, had on its pamphlet the logo "Nuclear Free Festival Week". The ratepayers' money is being spent on a nuclear free festival week. What does that have to do with jobs and the people? The declaration of a "Nuclear free zone" will not stop us from being bombed. Expenditure of £12,000 warning people that they are entering a nuclear free zone did not reassure my constituents or anyone else—as usual, it made Leicester a laughing stock. The city has two active Conservative Members of Parliament, yet, because it has a Labour council, people want to attack us. We stand up for the people of Leicester.
The Leicester people feel hard done by when they see how much money the city council spends on the politicisation of jobs manipulating some of our citizens.
The unions in Leicester do not want to bring extra jobs to the city, because they are worried about equality of opportunity. They tried to stop 400 jobs from coming in through the community programme. We are fighting for those jobs for the city. We must keep up with the business of rate capping. I urge my right hon. Friend the Minister to ensure that the rates continue as they did before and that the council is checked financially. The Labour group will

try to whip up feeling on this matter. Each time in the annual whip-round the Labour group says that it has been fighting all the way to protect the people. Members of that group fight to protect themselves. They scare us and spend more money, yet, at the end of the day, they will not go through with their aims.
I am very keen, as is my hon. Friend the Member for Southampton, Itchen (Mr. Chope), that council services should be put out for competitive tendering. There is a lot to be done there. Leicester proved, when it had the fear of being rate capped, that it could keep within its limits. I should like us to consider what else we as a Government can do to save the citizens in all our great cities a large sum of money, whether it be on vehicle maintenance, refuse collection—

Mr. Rooker: The golf course?

Mr. Bruinvels: Yes, even the golf course—anything that will bring about some savings for the private golf course. This must be welcome to anybody who wishes to see savings made for the citizens of Leicester.
I am worried about the Leicester Labour party. It has now established a research and information unit to supervise the existing public relations campus. It has been called by the civics reporter of the Leicester Mercury, Colin Vann, "the Ministry of propaganda". This research and information unit is comprised of an information officer, two information assistants and a clerical assistant. It is to spend £29,000 a year with three officer contracts to monitor not only what is happening outside but what is going on in the city council. It is to look at the work of the Labour councillors because obviously it is felt that some of them are not Left wing enough! I do not know about that, but I think that it is incredible. Does it not have its own whip to look after the Labour councillors? We have a whip on the Conservative side of the council Why does it need this monitoring unit?

Mr. Rooker: To check on your questions.

Mr. Bruinvels: It wants to increase public awareness. We all know what is going on in the city of Leicester through the daily Leicester Mercury. We all know what the council is doing because it is advertising this in the Leicester Link. Why is this unit needed? Is that not the kind of thing which would save all the ratepayers of Leicester some money? But, oh no—it also wants to take over education from the county council. A city council to run education? It cannot even run its own council, so why does it want to interfere in education? I suppose that it wants to politicise that as well, and to bring politics into the school room. That is scandalous, it should not be allowed and I shall fight against it. Then there is social services. I suppose that it wants some of its own employees to get social security handouts.
It has a budget of £137,000. That is atrocious. It wants to reject attacks on local autonomy and services. It may wish to do that, but I interpret it as the foundation of extreme Socialism, and I shall have no hesitation in referring this unit directly to the Widdicombe inquiry because I think it is the kind of thing that should be examined.
Keeping the rates down is the most important thing that the Government have so far done. This is bringing real jobs into the city again and giving prosperity to a large number of businesses. If the rates are kept down and


Leicester gets back into line, I feel certain that, when the next election comes, Leicester will be better off and better run and, I hope, Conservatives will be running the city council.

Mr. Peter Pike: In the early part of the debate, the Minister referred to the county council elections and in particular to the results of Lancashire county council. As a shire county council representative, I think that one should consider Lancashire in perspective.
The Minister should recall that when local government reorganisation took place, all the Labour strongholds on the south side of the county were put into Merseyside, Greater Manchester or Warrington, which was transferred into Cheshire. That was an attempt by the Government to try to ensure that Labour would never take control of that county council.
In 1977, Labour had only 12 seats on the council, in 1981 we moved into a majority, and even this year's results were extremely good for the Labour party. We now have 48 seats, and remain the largest party on the county council.
The Minister referred to the Crosland speech in 1976, as did the hon. Member for Halifax (Mr. Galley). The situation in 1976, when councils were being asked to exercise restraint, was very different from the position which we now face. At that stage, there was no penalty and no rate capping. There was some fat which councils could cut then but, cuts having been made continuously since then, that is no longer so. Any further cuts in local government bite on essential services. As finance chairman, I was called to London at that time to meet Anthony Crosland at party headquarters. We co-operated at that stage. It is important to remember that at that time councils had the right to fix their own rates, a right which has now been removed from them.
My hon. Friend the Member for Copeland (Dr. Cunningham) referred to the reform of local government. The one thing that the legislation that has recently completed its passage through Parliament will give the future Labour Government the opportunity to do is reform the whole of local government. The legislation makes it a priority to deal not only with the metropolitan counties but with the shire counties and, as my hon. Friend said, also to give democratic control over hospitals, water and many other services. I look forward to the day when, as Secretary of State, my hon. Friend introduces a Bill that will take us forward in that direction.
My hon. Friend the Member for Manchester, Central (Mr. Litherland) referred to disregards with particular reference to the urban programme. I fully support his comments. We are told repeatedly that the Department of the Environment is considering this issue. But I believe that all expenditure—be it programme, designated authority, partnership or traditional urban—arising from the urban programme should be disregarded.
My hon. Friend also referred to housing benefit, and one must take into account the social security review which will transfer an additional 10 per cent. burden that will have to be met from local government funds.
The Green Paper says that GREs will be adjusted, and it is reasonable to assume that if the Government are to save money—one accepts that that is the purpose of the

exercise—the adjustment will not be a full one and that once again the burden will have to be borne by local government.
Paragraph 1(e) of the RSG supplementary report for 1985–86 indicates a total overspend of £278 million. I should stress that that is the Government's view, because I do not believe that it is an overspend. but that is 1·27 per cent. above the figure which the Government believe should be spent. That figure has attracted a block grant penalty loss of £550 million, which is equivalent not to 1·27 per cent. but to 6·5 per cent. That is a further blow to local government, local democracy, local services and local ratepayers.
In 1984–85, when the Government determined the overspend to be £841 million, the penalty was £452 million. This increase in the penalty rate is the severest yet and is almost double the overspend. This cut in block grant is returned directly to the Exchequer, and to meet that expenditure the burden must be put on to ratepayers, otherwise essential services will have to be cut yet again and there will have to be further job losses.
Most shire counties have targets below the GRE figure for 1985–86, but this type of penalty has forced them to keep their figures below GRE. That makes a nonsense of the Government's own GRE system.
I have always believed that at some stage the Government would make the GRE the key target figure. If the rumours are correct, that seems to be the path that the Government will now follow. We shall hear the announcement next week. If that is so, while it will benefit many shire counties, including Lancashire, which spends below GRE—given that the penalty to spend at that figure would be too high—it will penalise councils such as Burnley in my borough.
Burnley's cash target is 50 per cent. above its GRE, and it is one of the 13 councils that have a cash target so much above GRE. If the Government are to contain expenditure within the GRE figure, it stands to reason that authorities spending over it will be more heavily penalised. I accept that the rate of grant above GRE is progressively lower, but as the scheme continues I have no doubt that the position will worsen. That will place Burnley and many other authorities in serious difficulties, and it will result in more cuts, more job losses and an inability to deal with problems such as housing, the elderly and all the others with which local government is trying to deal.
I have always believed that Government have a right to fix the total amount of expenditure that councils should be able to spend, but at present that amount is far too low. Local government and Parliament have the right to argue about that amount, but, even more important, local government should be given the freedom to spend the money that it believes is necessary to maintain services.
If the GRE system is to be strengthened and improved, it must be more clearly understood. At present, it is neither understood nor fair. Several times before my election to the House but as leader of the council, and since my election as a Member of Parliament I have met civil servants on the issue. They failed to explain how they arrived at the figures. People in local government do not accept that the system is either fair or right and there must be key changes.
My hon. Friend the Member for Greenwich (Mr. Barnett) referred to a number of factors, and certainly a key one for a non-metropolitan district is the housing factor E7. That is crazy and puts Burnley in an


unfavourable position compared to our neighbouring authority, the borough of Blackburn. I cannot see why there should be such a difference. One great problem of the late penalty set out in the third report is that councils have to take it into account after the end of the financial year and after they have fixed their budgets. In Burnley's case that means the council has to find an additional £80,000 for this year. That is the equivalent of 1p on the rates.
It is time the Government devised a much fairer system for local government and allowed democratically-elected local representatives to deal with the problems and services in their areas. I could say a lot more but another of my hon. Friends wishes to speak. I hope that the Government will make changes in the way that they tackle these problems.

Mr. John Fraser: The Minister argued in this debate that somehow rate capping and penalties increased the efficiency of councils. But the game was given away by one Conservative Back Bencher after another. They talked about the pet projects of Labour councils, but what the Government are really about is to use the House as a court of appeal from decisions of elected local councillors. It is no function of ours to decide how an elected local authority should conduct its affairs.
The Minister made a comparison between Wandsworth and Lambeth. The reason why Wandsworth has a low rate is partly because it does not incur penalties, and partly because Wandsworth, within its power, took a political decision to sack people on a very great scale, to abolish services, to cut back on services for the elderly and the young, and to cut back on housing. Those were political decisions, and there is no way a Minister is going to force Labour councils to take decisions of that sort except in the most excruciating circumstances. All this is certainly not going to increase the efficiency of any local authority.
There is no evidence to suggest that the Minister is in any way capable of getting a local authority to change the way it behaves. If that were the case, I would have people coming to me in Lambeth saying that as a result of rate capping and penalties the repair service and housing benefit administration were more efficient, and the admission of people to homes for the elderly was better. There is no evidence that the interaction of what the Government are proposing and what the local authority does leads to an improved service at a lower cost.
What we will have is an increase in inefficiency, because as one gets industrial action or reaction to the Government proposals, as councils are locked in battle with the Government, as penalties pile up and as people are sacked—which is inevitable if cuts are made—what will follow is a lower quality of service and a lower standard of efficiency. There is no link between efficiency and these proposals. It is simply that the Government want to substitute their political judgment for the judgment of elected councillors. The consequence will be a combination of cuts, chaos and confrontation at a cost to the ratepayers,
Even on the present figures of rate capping in Lambeth, on the Government approved level of expenditure of £113million we suffer a penalty of £1·6 million. That is not a penalty on councillors; it is a penalty on the ratepayers. I cannot see the logic of that sort of arrangement. The Government revised the amount of

money we can spend in Lambeth to £122 million. Then we were penalised on that Government-approved level of expenditure to a total of £11 million.
The illogicality of the system is at its most acute in relation to urban aid projects. Lambeth council is picking up projects approved by central Government, and time-expired projects in the current year amount to £1·5 million. The Government's failure to review £800,000 of urban aid programme expenditure means that Lambeth will lose £660,000 in grant because it is carrying on with time-expired projects. Next year that figure could be £1·1 million. We end up with a confrontation between Government and councillors in which there can be no victor, only victims.
Taking up the suggestion made by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), I suggest that in the short time which remains the Government should tell the district auditor that the Government have already stood to benefit by £113 million in grant lost to Lambeth, that in the current year alone the Government can expect a profit of between £1·6 million and £20 million in penalty on the figures contained in the orders and that in view of that very large gain to the Government it is about time that the auditor stopped his depredations and left Lambeth council to make its own political judgment about the level of services to be provided in Lambeth without the Government interfering in this overbearing way with penalties and rate capping.

Mr. Jack Straw: The debate has been notable for the fine speeches made by my hon. Friends the Members for Manchester, Central (Mr. Litherland), for Liverpool, Walton (Mr. Heffer), for Greenwich (Mr. Barnett), for Norwood (Mr. Fraser) and by my good friend from Lancashire, my hon. Friend the Member for Burnley (Mr. Pike). It has also been notable that at no stage has any representative of what is described as the Social Democratic party been present.

Mr. Waldegrave: As the right hon. Member for Glasgow, Hillhead (Mr. Jenkins) put in a rare appearance today, is it not disappointing that he could not stay among us a few minutes longer?

Mr. Straw: The right hon. Member for Glasgow, Hillhead (Mr. Jenkins) represents a Scottish constituency, although he may not do so for much longer, but, as ever, I share the Minister's concern.

Mr. Simon Hughes: As the hon. Gentleman knows, my colleague and hon. Friend the Member for Woolwich (Mr. Cartwright) speaks for the Social Democratic party on local government. My hon. Friend was in hospital yesterday and is recuperating today. Otherwise, he would have been here. For his sake, it is right that I should put that on the record.

Mr. Straw: I know that the hon. Member for Woolwich (Mr. Cartwright) is an assiduous attender and we send him our commiserations, but I should point out to the hon. Member for Southwark and Bermondsey (Mr. Hughes) that there are other members of the Social Democratic party.
In January this year, the Minister for Local Government in what he described as his
maiden speech in a rate support grant debate
described the system as


well nigh incomprehensible and … understood only by the initiated.
He went on to say:
I accept that the system is byzantine in its complexity and that it is probably fully comprehended only by those who have a taste for scholastic theology."—[Official Report, 16 January 1985; Vol. 71, c. 411.]
It is also of interest to those with a taste for error, and our debate today has been punctuated by information about the errors in the report. My hon. Friend the Member for Copeland (Dr. Cunningham) pointed out that a major error of £30 million in the 1982–83 settlement is being institutionalised in the third supplementary report. There is a straightforward solution to errors of that kind which even the Government might accept. Even at this late stage, they should recompense the shire authorities which have been losing for so long without disadvantaging other authorities. We commend that solution to the Government. My hon. Friend the Member for Wansbeck (Mr. Thompson) also pointed out that the figure for Northumberland should be £110 million and not £111 million.
We all appreciate the complexities of the system. Indeed, some complexity is inevitable in any system of grant redistribution. Nevertheless, it is incumbent upon Ministers to ensure that the reports are as accurate as possible; and, when inaccuracies are brought to their attention, they should withdraw the reports until they have been corrected.
There is a third item, which I raise on behalf of my hon. Friend the Member for Newham, North-West (Mr. Banks), who is chairing a meeting of the Greater London council. This is the first debate on rate support grant, abolition or rate capping that he has missed. Ministers are familiar with the argument. The information in the third supplementary report for 1982–83 is based on the first return submitted by the London borough of Newham some time ago. It submitted a revised return which was certified by its external auditor, Arthur Young. Newham believes that it will suffer severely if its grant entitlement is not based on that revised return. Although the Secretary of State has said that he hopes that the third report will be the final one, I hope that, if he is satisfied with the representations made by Newham, he will be willing to bring forward a fourth supplementary report to accommodate the difficulties that Newham has raised.
Behind what the Minister described as scholastic theology and the complexity and statistical trickery of the rate support grant system lie consequences for local authorities and the people they represent which are simple, straightforward and brutal. The report is part of the crude, politically biased mechanism by which the Government impose their will on local communities and their representatives regardless of those communities' will.
No Government have prayed democracy in aid more than this one and no Government have undermined democracy more than this one. The Government continually fail to comprehend that the essence of democracy is the right to choose, the right to say, "No", the right to disagree. In theory, people have those rights but, in practice, when the people and their representatives try to exercise them, the rights are cut away and the representatives are cut down. Great local authorities are abolished—seven are to be abolished by the Act that received the Royal Assent today—because their voters

chose to elect Labour councils. There is no other reason. When the remaining local authorities try to meet the needs of their communities, they are penalised and punished for exercising their democratic rights.
Increasingly, the Government's motto is, "You can do anything you like, provided that we agree." The Minister revealed himself when he described 90 per cent. of authorities over target as Labour and said, "Old habits die hard." What arrogance. Does he not understand that the Labour party is in the habit of caring about communities and of being willing to spend money on them? We are willing to invest in those communities. We have the habit of Socialism and we shall not throw it away just because the tanks of Marsham street driven by the Minister are driven in the way of those authorities. It was revealing when the Minister dismissed the will of those Labour-controlled authorities and their electors by saying that old habits die hard.
Under the first supplementary report for 1985–86, the severest ever penalties are imposed on local authorities—apparently 90 per cent. of them are Labour controlled—which exceed their targets. For every £1 of alleged overspend, £2 is taken away in penalties. To pay for an alleged overspend of £278 million, the Treasury takes back £550 million. So grotesque has the system become that the Treasury now has a vested interest in its continuance. Whatever Department of the Environment Ministers may say, the Treasury wants authorities to spend over their targets, for overspending reduces the public sector borrowing requirement—and it is at the shrine of a diminishing PSBR that the mad monetarists still in charge of the Government worship.
We object root and branch to the target and block grant system which penalises individual authorities for choosing a level at which they should spend. The system is made all the more outrageous by the Government's chosen methods. As I reminded the House, at least the Minister has acknowledged that the system is Byzantine and incomprehensible. The Secretary of State, who, as ever, disagrees with his Minister, told the Committee only last year that the system, which the Minister describes as Byzantine and incomprehensible, provides robust and objective tests. Would that the Secretary of State were telling the truth about the system. There is nothing objective either about targets or GREA. Time and again the system's objectivity has been bent in pursuit of partisan political goals.
Some of my hon. Friends may know of a cosmetic range called Max Factor. It was even the subject of some smutty rhymes when I was at school. The Government use a cosmetic to disguise their true intentions, which is called the E7 factor. The report, at paragraphs 18 and 19, waxes eloquent about the E7 factor in language which I am sure its authors scarcely comprehended. My colleagues can take it from me that the gobbledegook disguises a simple and straightforward fraud on Labour-controlled and higher-spending authorities.
In the Housing Act 1980 local authorities were for the first time allowed to make profits from council tenants. Conservative non-metropolitan districts have taken advantage of that with alacrity. Some authorities, such as Epping Forest, South Oxfordshire, Tandridge and Wansdyke, use profits from their council tenants to pay for between one fifth and one third of expenditure from the general rate fund. Therefore, council tenants pay rents


both for their houses, and for the bin and environmental services of all the ratepayers in their area. In effect, council tenants are subsidising richer owner-occupiers.
The position is even worse. To ensure that the Tory shire districts get the best from the rate support grant system, and that they escape penalty, the E7 factor assumes that none of those authorities makes any profit from its housing rent for the purpose of giving it rate support grant. Ratepayers in those areas are, therefore, subsidised twice. Should there be any danger of the Tory shire district reaching its target, the council can increase its rents still further, because expenditure from additional profits does not count against targets. It is an utter scandal. It is not surprising that when a minute marked "Confidential E7 development work" about items that might be politically embarrassing, which was sent from the Parliamentary Under-Secretary of State to an official in the Department, was leaked, the Government's embarrassment was extensive.
Today both the Minister and the Parliamentary Under-Secretary of State said that 74 per cent. of authorities had been able to live within their targets. However, they have ignored the fact that the rules are designed to enable Tory shire districts to escape. If we weight the authorities by spending, a quite different picture emerges. Conservative authorities such as Essex, Harrow, Enfield and Hillingdon would suffer the consequences of penalties on their expenditure. If the Minister wishes to listen to me, I can answer the question that he has just put to his hon. Friend the Parliamentary Under-Secretary, as I lip read. Fifty-nine of the 116 major spending authorities—the London boroughs, metropolitan districts and shire counties—are subject to penalty and target. That is a measure of the harm and hurt of the Government system.
The system is so ludicrous that even the Government know that it is likely to collapse under its own weight. The system, which was designed to increase the popularity of the Government, has proved disastrously unpopular, as they discovered in the shire county elections two months ago, and subsequently in their first loss of control of the Association of County Councils. The hapless Minister and the Under-Secretary of State have been set to work to find the Holy Grail and to redeem the tawdry pledge made 10 years ago by the Prime Minister that she would abolish domestic rates.
Tonight, the Minister has been uncharacteristically coy about this work. I note that I have had no reply to a letter that I sent to the Prime Minister almost a fortnight ago seeking answers to simple questions about the studies. I wanted to know when it would he published, whether there would be a Green Paper, and whether it would contain lists of winners and losers. Perhaps at the last minute, as with the social security reviews, the Government will get cold feet and suppress the facts upon which the decisions could be made. Perhaps we shall have to wait until the Conservative party conference for all this information. Whoever will be the new Secretary of State for the Environment—the fact that there will be a new one is certain—will be honing his speech which he will give to the masses there assembled. Will it be the Minister for Local Government? Is he taking a holiday in September? Will he leave his telephone number with No. 10 just in case?
All that is for the future. What of next year? The Secretary of State has repeatedly expressed his desire to sweep away the target system, and the leaks suggest that

that may be announced next week. But I warn my hon. Friends and local authorities not to rejoice prematurely. We must all beware Ministers bearing gifts. Unless the Chancellor and the Secretary of State have suddenly abandoned the habits of a political lifetime, most local authorities will be thrown out of the frying pan into a raging fire. If in place of target and penalty we shall have GREA and penalty, the results for all but the shire counties will be significantly worse. The grant-related expenditure assessments of most London boroughs and metropolitan districts are lower than their targets. Therefore, the consequences of basing penalty on GREAs rather than on targets would be even worse.
Moreover, to use GREAs in this way would be a categorical breach of the undertakings given to the House when the GREA system was established in the 1980 Act. The previous Secretary of State for the Environment, now the Secretary of State for Employment, said on 1 April 1980:
It is not suggested that it"—
the needs assessment—
prescribes a specific level to which an authority ought to spend …I want to make it clear that that was not the purpose. We are seeking to find the fairest way to distribute public money to local authorities."—[Official Report, Standing Committee D; 1 April 1980, c. 941.]
The Secretary of State had said earlier:
My Department will not be in the business of saying how much each authority should spend, where it should or should not make cuts or on what it should spend money. Local authorities are autonomous. They fix their rate systems."—[Official Report, Standing Committee D; 27 March 1980, c. 840–41.]
On the basis of those undertakings, the House accepted the principle of GREA in 1980.
The main question that we must ask is: what has been achieved by all the mess, misery and chaos of the past six years? It has certainly not helped the Government's popularity nor, sadly, the Secretary of State's career. In what way has it improved the welfare of the nation, our economy or even unemployment, for which the Government now profess concern? The answer is that no benefit has been achieved. Ministers weep crocodile tears about domestic and business ratepayers, but they know that rates have increased by 80 per cent. above the rate of inflation because of their cuts in rate support grant. In government, Labour's policies produced lower rates, and would have continued to do so had we remained in government. In so far as business rates have increased, the Government know that there is not a shred of evidence to support their claim that rates increases have caused the loss of jobs.
It was, after all, this Government who ordered the £50,000 study from the University of Cambridge on the effects of rates upon the location of employment. It was that report which confirmed not just what we have been saying but what many reputable independent firms of surveyors have been saying—that there is no relationship between rate levels and the loss of jobs.
The Government can, of course, dredge up the comments of Conservative business men who say that rates are a burden, but they have had the report for six months and produced not a paragraph of proper refutation of its conclusions.
The report concluded that there was a failure to detect a locational effect of rates, which probably indicates that no such effect exists. The report went on to say that
in contrast to the negative conclusion concerning rates, the study draws attention to different factors that have a large and


measurable effect upon location, in particular manufacturing and employment trends, the mix of industries, the size of factories and the extent to which an area is urbanised".
The report not only said that but went on to say that Labour authorities—the authorities spending more and therefore rating more—might be the ones that were creating jobs. The report went on to say:
If high rates are used to finance high local authority spending, it is likely that a local authority's own workforce will be larger than it would otherwise have been. If this is the case, a high level of rates will be associated with a high level of local employment. This is the opposite of the conventional argument that high rates are harmful for local employment".
The conclusion of the report is that it is Labour councils which have been protecting jobs and the Conservative Government who have been destroying them.[Interruption.]I am sorry to discomfort Conservative Members with the truth, but they should read the report. I know that they do not ever wish to have facts to illuminate their prejudices, but if they want to know the truth about rates and jobs they should read the Department's own report.
Until two weeks ago the Government could at least claim the merit of consistency. They could claim that they have been saying again and again that they were against public spending; that it was bad for Britain and had to be cut. But even that alibi, that excuse, has now gone. It has been shot away by the Chancellor of the Exchequer in his panic speech in Oxford after the trauma of Brecon. He now tells us, after all this, that the Government are in favour of public spending. I quote from the report in the Conservative Party News Service, where the Chancellor is recorded as saying:
Our public spending record is a good one. It is the middle way".
He went on to say:
we do spend more where it is needed. On doctors. On nurses. On each pupil at school".
It is true that the Public sector as a whole, the local authorities, are now spending more on each pupil at school than in 1979, but that is no thanks to this Government. Had this Government had their way, and had their expenditure plans worked out as they intended, expenditure per pupil would have dropped by £55 per head in real terms between 1980 and 1985. It has risen by £115 per head only because local authorities, led by good Labour groups, have put the needs of the children of their areas above the harsh and brutal spending plans of the Government.
For that record of increasing spending on each pupil at school, the Chancellor of the Exchequer—the man who now claims credit for the improvement—has sought to brow-beat authorities with every weapon at his disposal to get them to reduce their spending. What audacity; what hypocrisy.
At today's prices, expenditure per pupil was planned by this Government to fall from £1,130 in 1980–81 to £1,085 in 1984–85; in fact, it has increased from £1,050 to £1,065. If that increase in expenditure on pupils at school is a good thing, and if the Government now claim credit for such an increase, why have the Government repeatedly, and by these orders tonight, sought to pile penalty after penalty on authorities which have been seeking to do no more than that which the Government now proclaim? An answer from the Government is required.
We have a Government who are bereft of ideology, principle and purpose. The orders achieve nothing but

vindictiveness upon local authorities and hurt for the communities that they serve. They are worthy of the Ministers responsible for them, and we shall oppose them.

The Parliamentary Under-Secretary of State for the Environment (Mr. William Waldegrave): It is pleasant to return to a rate support grant order debate. For some reason, I have missed one or two. Nothing seems to have changed very much in my absence, and certainly not the speeches of the hon. Members for Copeland (Dr. Cunningham) and for Blackburn (Mr. Straw). At the end of his remarks, the hon. Member for Blackburn entered into his PESC speech, his public expenditure speech. Perhaps there will be a reshuffle of those on the Opposition Front Bench in due course.
One notable absence is that of the hon. Member for Newham, North-West (Mr. Banks), who is chairing his great council almost for the last time. My right hon. and hon. Friends and I have missed his moderate and quiet analyses, his tact in dealing with the issues before us and his courtesy to all and sundry. The only differences in the speeches of the hon. Members for Copeland and for Blackburn since I last heard them is that their tongues sink rather deeper into their cheeks each time they make them.
We have had the speeches about the end of civilisation, democracy and local government as we know it. We had a classic version from the hon. Member for Greenwich (Mr. Barnett). The problem for Labour Members is that democracy refuses to come to an end, as does local government, and the world goes quietly on. In the prediction game, the predictions made by Conservative Members seem, on the whole, to come rather more nearly true.
In one of these debates a couple of years ago the hon. Member for Blackburn said that rates would increase in Kensington and Chelsea by 40 per cent. In fact, they increased by 9 per cent., and this year they have been reduced by 9 per cent. The actual results this year seem to be rather closer to what the Government said would happen than the predictions of the hon. Members for Copeland and Blackburn and their right hon. and hon. Friends. We have heard their dire predictions about collapses of local authorities and the rating system, but 74 per cent. of all local authorities were able to meet their targets and 88 per cent. of them came within 2 per cent. of their targets. Only 14 authorities exceeded their targets by more than 5 per cent.
That is not too bad and the outturn was not too far from what we predicted. The net result is that total local authority spending has been held steady in real terms. The very long-term trend to which my right hon. Friend the Minister for Local Government referred, which we have slowed since 1979, has now been stopped.
In a philosophical soliloquy the hon. Member for Blackburn asked, "What has it all been for?" The answer is that we have done that for which we were elected. We have succeeded in slowing down and stopping the overall growth in local authority expenditure.

Mr. Straw: rose—

Mr. Waldegrave: No, I shall not give way. The hon. Gentleman has only recently concluded his speech and he did not leave me quite as much time as we agreed upon. I shall press on. The purpose of the exercise has been expenditure restraint.
We have had some splendid speeches from my hon. Friends. I have in mind my hon. Friend the Member for Norwich, South (Mr. Powley), my hon. and learned Friend the Member for Leicester, South (Mr. Spencer) and my hon. Friend the Member for Leicester, East (Mr. Bruinvels). My hon. Friend the Member for Norwich, South said once again, and rightly, that the penalties on high-spending authorities are all part of the process of putting pressure where it should be, which is on the high spenders, the profligate authorities, so that more responsible authorities can be treated more fairly. That is what the orders are all about and that is the purpose of our restraint on local authority spending. I am grateful for the support of my hon. Friends.
I sympathised with several of the arguments of the hon. Member for Southwark and Bermondsey (Mr. Hughes), one of which was for stability. The objective of all my right hon. and hon. Friends and myself is to make all the improvements that must be introduced into the system. The Audit Commission's report has been quoted at us and I accept its criticisms on the capital control side and on the complexities of the system. I accept that stability must be one of our objectives.
The other side of the coin has been presented throughout the debate. It has been said that we must have specific changes to the local authority system that will provide perfection. That argument was not advanced by the hon. Member for Southwark and Bermondsey, who stood four square with the view that it would be better for the procedures to be slightly simpler and for there to be an element of rough justice if we could achieve more stability. That is a fair criticism of the present system.
In directing themselves to the 1982–83 final report, the hon. Member for Copeland and my hon. Friends the Members for Tiverton (Mr. Maxwell-Hyslop) and for Halifax (Mr. Galley) all referred to "the mistake". I shall not shelter behind the word "anomaly". In the difficult decisions that my right hon. Friends have to make, that is a classic example of the tension that exists when trying to perfect the system at the cost of importing further instability. When that mistake was discovered and discussed with local authorities way back in 1982–83, after we had made the point that there would be a disregard in that year—the hon. Member for Blackburn will remember that there was a GRE exemption that year and that it therefore mattered how GRE related to targets—there was no continuing pressure from local authorities to make changes.
It is fair to say that the Association of Metropolitan Authorities and some authorities have been urging us to correct that mistake. That can be done only at the cost of importing further instability into the system elsewhere. Today we are being urged to make changes and shift money in mid-year. That would be difficult for local authorities. We must find a balance. That was a difficult decision for my right hon. Friend the Secretary of State, and that is why he came down on the side that he did. It was a reasonable decision.
The hon. Member for Blackburn made a point about Newham on behalf of his hon. Friend the Member for Newham, North-West. As the hon. Gentleman is aware, my right hon. Friend the Secretary of State has a statutory duty to use the best information available to him. When two outturn figures are given to him, he has a difficult judgment to make. I shall draw my right hon. Friend's

attention to what the hon. Gentleman said and he will reconsider the matter. I do not give a commitment that he will change his decision.
On the 1985–86 report, my hon. and learned Friend the Member for Feltham and Heston (Mr. Ground) asked about the Hounslow change. That was one of the improvements that caused the instability. It is a factor that must be remembered when people are urging us further to refine the GRE factors. There was a change which had an effect on some authorities, including Hounslow.
My right hon. Friend the Secretary of State has carefully considered Hounslow's request. The 1982–83 precedent is not a fair one to use. The matter about which my hon. Friend asked is not a mistake; it is a change derived from the improvement. It would not be right to "safety net" the changes as was done with the earlier anomalies.
I am not convinced by my hon. Friend's arguments. When we are urged by delegations—I see a great many of them—to make further changes and exact adjustments to the system, that always results in an unexpected change elsewhere. That is one of the arguments for not making too many changes from year to year. I know that my right hon. Friend the Secretary of State appreciates that fact.
We have begun to slow down the growth of local authority expenditure which has been continuing year in, year out for 30 years. It was, on average, 3·5 per cent. higher than inflation throughout the 1960s. We began to slow it down after 1979. Until this year, we had a real average increase of about 1 per cent. That is still formidable. We were teased by the hon. Member for Copeland for not having done more. We were asked whether we were proud of our record in controlling spending. I do not think that we are. We should have liked to have done more. That is what we were elected for. This year, we have stabilised it.
Attention has now turned—it should have turned earlier to some extent—to how to obtain value for money out of the existing spending. There are no slashing cuts in overall resources. There must be an inexorable search for value for money so as to deliver services from stable resources.
The Audit Commission's report has been mentioned today. I have heard some astonishing things said about the auditor by people who, with respect, should know better. I was astonished, for example, to hear the hon. Member for Norwood (Mr. Fraser) say that my right hon. Friends should tell the auditor this or that. He may have been pulling our leg, because he is aware that my right hon. Friends cannot legally tell the auditor, X, Y or Z. He is independent, and it would be a fundamental infringement of one of the points of his constitution, which is so often prayed in aid in those matters, if we were to interfere with the auditor's independence. I am sure that the hon. Member did not mean that. If he wants to withdraw it" I shall be happy to give way to him.

Mr. John Fraser: I am not suggesting anything about the auditor's statutory functions. However, it is open to the Government to represent to him that a massive profit has been made by the Treasury out of these machinations, and that should be taken into account when he makes his final decision.

Mr. Waldegrave: The auditor has a statutory duty as to what to do if he believes that there has been illegal


behaviour in a local authority. If we were to start making the political points that the hon. Gentleman suggests that we should make, I hope that the auditor would not open our letters but simply return them to us.
I am sorry that I was not here to hear the speech of the hon. Member for Liverpool, Walton (Mr. Heffer), but my right hon. Friend the Minister for Local Government has reported on it to me. I gather that the hon. Gentleman also wanted us to repeal the legislation in which the statutory independence of the auditor is enshrined. That is a serious suggestion. I hope that that is not the policy of the Labour party. If it is, it is a new policy. The late lamented Mr. Anthony Crosland was among the foremost in defending the independence of the auditor. If I have misrepresented the hon. Gentleman, I shall give way.

Mr. Heffer: I did not say anything of the kind. The hon. Gentleman had better read what I said. Do not local authorities have statutory obligations? Do they not have to carry out certain functions based upon legislation? They are choosing not to carry out the law because of the Government's policy.

Mr. Waldegrave: I have not heard any suggestion from the hon. Gentleman's local council that it has gone to court to say, for example, that the targets have prevented it from carrying out its statutory duty. There is a clear statutory duty on the auditor to pursue any allegation of illegal behaviour, and there is nothing that my right hon. Friends can, should or will do to interfere.
The Audit Commission has made recommendations to the local authorities about value for money. Often value for money can be achieved to increase the services elsewhere or to give money back to the ratepayer. It is up to the judgment of the local authority to decide which of those courses to follow.
My right hon. Friend the Minister for Local Government asked for the view of Labour Members as to why there are such huge differences in spending—for example, £126 per pupil on school cleaning in one authority and £31 in another. This cannot be because there is that much more cleaning to do. The Audit Commission does not believe that. There is the example of vans that are serviced every 10 miles. Nobody can pretend that that is anything other than bad management.
One authority is able to fill all but 0·5 per cent. of its housing stock, whereas other authorities have 5 per cent. of their housing stock vacant. This is bad management and a waste of resources. Any elected official is a trustee of other people's resources, and it is a serious matter if he is not using properly the money that is entrusted to him.
In its recent report on further and higher education colleges, the Audit Commission estimates total possible savings without damaging services at between £125 million and £150 million a year. That money could pay for 75,000 more students, or could be given back to help local industry. The Audit Commission found some lecturers teaching only 10 hours a week. In one college, it estimated that slack management cost £235,000 a year. Bad debt management cost £70,000 in another.
However, there are other colleges that are doing well and it is right to congratulate them. The good colleges are not necessarily in Conservative authorities. I can quote a good college in a Labour district, Wakefield district college. It is a model of what can done with such a college.

It is open for 48 weeks in a year while most are open for only 36 weeks. Courses are tightly managed, achieving excellent exam results while pushing pupil-teacher ratios of 8:1 which is more generous than for a full research university, to 14:1 which is more as it should be. The college has a 96 per cent. retention ratio on its courses. What is wrong with that? We must ask why, if Wakefield can do that, others cannot.

Mr. Barnett: rose—

Mr. Waldegrave: I have only a few more minutes, and the hon. Gentleman made a long speech, so I shall not give way.
The hon. Member for Southwark and Bermondsey (Mr. Hughes) quoted from The Guardian. I read The Guardian, too. In today's edition of The Guardian Maureen O'Connor says that Newham's 3,000 surplus secondary school places are not only bad for the school, because they are distorting the size of the school, but cost the borough about £ 1 million a year, just in wasted resources. I know that I have the hon. Members for Copeland and for Blackburn with me on this point. The hon. Member for Blackburn has a long and honourable record on value for money. He was quoted in the Daily Telegraph of 6 June 1984 as having said the following at a Chartered Institute of Public Finance and Accountancy conference in Brighton:
There is a private joke in the Labour party that the two main obstacles to socialism are Margaret Thatcher and the Camden Housing Department, to which I might add the Islington Building Works Department, certainly when I was its Chairman.
That is very engaging and open. The hon. Gentleman continues:
All of us have had some personal experience of a public service which has been rude, or inefficient, or incompetent which has appeared in short to be serving itself rather than the public.
If the public sector as a whole had apparently been less self-serving, less complacent and more efficient, then the climate for cuts and privatisation would have been altogether far less favourable.
That is a very honest and straightforward thing to say. Let me press the hon. Gentleman a little bit further.
I calculate that the Audit Commission shows that there could be savings of about £1 billion a year, and it has looked at only one quarter of local spending so far. Regardless of whether that should go back to the ratepayer or the business man—that is the political divide between us—nobody in the Opposition will try to argue that those savings are not there for the making, because they are, and they should be, and it is a disgrace that they are not.

Mr. George Walden: Will my hon. Friend give way?

Mr. Waldegrave: With respect, I must complete my speech.
We have heard the usual accounts of the Liverpool problems. The Labour council seems to be sleepwalking towards disaster. I understand that as a result of Mr. Scargill sending for the leader of the Labour party last week, the unfortunate hon. Members for Copeland and for Blackburn are now being sent off in their turn to talk to Mr. Hatton and his cronies in Liverpool. They may take some advisers with them—I recommend that they take the hon. Member for Birkenhead (Mr. Field), who knows how to deal with Militant, or perhaps the hon. Member for


Knowsley, North (Mr. Kilroy-Silk), who hopes that he knows how to deal with Militant. Perhaps with the two of them as bodyguards they will get on.
I hope that the hon. Member for Blackburn will share with Liverpool councillors his experience as chairman of the Islington building works department, so that he can explain about searching for value for money. Let me repeat the figure. For every £10 million of saving there would be £22 million more grant available to Liverpool. It is within the council's capacity to find its own salvation. I should like to explore further—

Mr. Heffer: Will the Minister give way?

Mr. Waldegrave: I must complete my speech. I want to explore one further area—

Mr. Heffer: rose—

Mr. Waldegrave: I shall not give way to the hon. Gentleman.
I want to explore with Opposition spokesmen one further area of potential agreement. I do not expect the hon. Member for Blackburn to support the Rates Act. He was bitterly opposed to the 19 per cent. rate cut that we delivered for the ratepayers of Greenwich, the 25 per cent. cut for Southwark and the 32 per cent. cut for Leicester. My hon. Friend the Member for Dulwich (Mr. Bowden), my hon. and learned Friend the Member for Leicester, South and my hon. Friend the Member for Leicester, East gave robust and welcome support to the benefits that have been achieved for their ratepayers.
However, I think that we may agree with the hon. Member for Blackburn in our views of the utterly disgraceful campaign waged by some Labour rate-capped councils. The hon. Gentleman was the victim of some of it. He was ridiculed by one of Ms. Margaret Hodge's propaganda sheets. He was a threat to local democracy because he had used local politics as a stepping stone to this place. Some people must look with amusement at the way in which some leaders of the London Labour party are scrabbling their way into this place, doing exactly the sort of thing that they criticised the hon. Gentleman for doing.
In the campaign not only were there absurd claims and not only was the hon. Member for Blackburn called a threat to democracy. The campaign was not just seeking to prevent the House from having the benefit of the many people who have served in local democracy, many of whom we have heard today, including my right hon. Friend the Minister for Local Government, who was a local councillor. It was that the whole campaign, which was certainly a fiasco, was not entirely a comic fiasco. Nobody will challenge me in saying that it was a fiasco. Certainly the SDP will not challenge me, for Councillor Anne Sofer wrote yesterday:
the great anti-abolition and anti-rate capping campaigns now echo sadly like tunes from last year's pop festival—the first played out and the second an expensive flop. What the London public sees now, when it looks at the London Labour party, is a bunch of squabbling incompetents".
That is the SDP's view.
I end with a more objective source. Stewart Lansley, a former Labour councillor, is now above politics—he has become a researcher for LWT—although, perhaps for old times' sake, he still contributes to New Socialist, a small circulation magazine. He writes:
far from creating a crisis for the Government, Labour has manufactured a crisis of its own.
He went on:

The responsibility for the…Labour…party's failure to measure up to the challenge lies not merely with local leaders but with the party leadership and the national executive. Neil Kinnock offered no leadership, and no strategy, save capitulation.
That is only the Leader of the Opposition's local government policy, not even his defence policy.

Question put and agreed

Resolved,
That the Rate Support Grant Supplementary Report (England) (No. 3) 1982/83 (House of Commons Paper No. 504), which was laid before this House on 11th July, be approved.

Motion made, and Question put,
That the Rate Support Grant Supplementary Report (England) 1985/86 (House of Commons Paper No. 478), which was laid before this House on 4th July, be approved.—[Mr. Kenneth Baker.]

The House divided: Ayes 263, Noes 202.

Division No. 279]
[10 pm


AYES


Adley, Robert
Cranborne, Viscount


Aitken, Jonathan
Critchley, Julian


Amery, Rt Hon Julian
Crouch, David


Amess, David
Currie, Mrs Edwina


Ancram, Michael
Dickens, Geoffrey


Arnold, Tom
Dicks, Terry


Ashby, David
Dorrell, Stephen


Aspinwall, Jack
Douglas-Hamilton, Lord J.


Atkins, Rt Hon Sir H.
Dover, Den


Atkins, Robert (South Ribble)
Dunn, Robert


Baker, Rt Hon K. (Mole Vall'y)
Durant, Tony


Baker, Nicholas (N Dorset)
Edwards, Rt Hon N. (P'broke)


Baldry, Tony
Eggar, Tim


Banks, Robert (Harrogate)
Emery, Sir Peter


Batiste, Spencer
Evennett, David


Bellingham, Henry
Eyre, Sir Reginald


Bendall, Vivian
Fairbairn, Nicholas


Benyon, William
Fallon, Michael


Bevan, David Gilroy
Farr, Sir John


Biffen, Rt Hon John
Favell, Anthony


Biggs-Davison, Sir John
Finsberg, Sir Geoffrey


Blackburn, John
Fletcher, Alexander


Blaker, Rt Hon Sir Peter
Fookes, Miss Janet


Body, Richard
Forman, Nigel


Bonsor, Sir Nicholas
Forsyth, Michael (Stirling)


Boscawen, Hon Robert
Forth, Eric


Bottomley, Peter
Fowler, Rt Hon Norman


Bottomley, Mrs Virginia
Fox, Marcus


Bowden, A. (Brighton K'to'n)
Franks, Cecil


Bowden, Gerald (Dulwich)
Fraser, Peter (Angus East)


Braine, Rt Hon Sir Bernard
Freeman, Roger


Brandon-Bravo, Martin
Fry, Peter


Bright, Graham
Gale, Roger


Brinton, Tim
Galley, Roy


Brooke, Hon Peter
Gardiner, George (Reigate)


Brown, M. (Brigg &amp; Cl'thpes)
Garel-Jones, Tristan


Browne, John
Glyn, Dr Alan


Bruinvels, Peter
Goodhart, Sir Philip


Bryan, Sir Paul
Gorst, John


Buchanan-Smith, Rt Hon A.
Gow, Ian


Buck, Sir Antony
Gower, Sir Raymond


Budgen, Nick
Grant, Sir Anthony


Burt, Alistair
Greenway, Harry


Carlisle, Kenneth (Lincoln)
Gregory, Conal


Carttiss, Michael
Griffiths, Sir Eldon


Chalker, Mrs Lynda
Griffiths, Peter (Portsm'th N)


Chapman, Sydney
Grist, Ian


Churchill, W. S.
Ground, Patrick


Clark, Hon A. (Plym'th S'n)
Gummer, John Selwyn


Clark, Dr Michael (Rochford)
Hamilton, Hon A. (Epsom)


Clark, Sir W. (Croydon S)
Hamilton, Neil (Tatton)


Clarke, Rt Hon K. (Rushcliffe)
Hanley, Jeremy


Cockeram, Eric
Hannam, John


Colvin, Michael
Hargreaves, Kenneth


Coombs, Simon
Harris, David


Cope, John
Haselhurst, Alan


Corrie, John
Havers, Rt Hon Sir Michael


Couchman, James
Hawkins, Sir Paul (SW N'folk)






Hawksley, Warren
Rost, Peter


Hayes, J.
Rowe, Andrew


Hayhoe, Rt Hon Barney
Rumbold, Mrs Angela


Hayward, Robert
Ryder, Richard


Heath, Rt Hon Edward
Sackville, Hon Thomas


Heathcoat-Amory, David
Sayeed, Jonathan


Henderson, Barry
Shaw, Giles (Pudsey)


Hickmet, Richard
Shaw, Sir Michael (Scarb')


Hicks, Robert
Shelton, William (Streatham)


Higgins, Rt Hon Terence L.
Shepherd, Colin (Hereford)


Hill, James
Shepherd, Richard (Aldridge)


Hirst, Michael
Shersby, Michael


Hogg, Hon Douglas (Gr'th'm)
Silvester, Fred


Holland, Sir Philip (Gedling)
Sims, Roger


Holt, Richard
Skeet, T. H. H.


Hordern, Sir Peter
Smith, Sir Dudley (Warwick)


Howarth, Alan (Stratf'd-on-A)
Smith, Tim (Beaconsfield)


Howarth, Gerald (Cannock)
Soames, Hon Nicholas


Howell, Rt Hon D. (G'ldford)
Speed, Keith


Howell, Ralph (N Norfolk)
Spencer, Derek


Hubbard-Miles, Peter
Spicer, Michael (S Worcs)


Hunt, David (Wirral)
Squire, Robin


Hunt, John (Ravensbourne)
Stanbrook, Ivor


Hunter, Andrew
Stanley, John


Irving, Charles
Steen, Anthony


Jenkin, Rt Hon Patrick
Stevens, Lewis (Nuneaton)


Jessel, Toby
Stevens, Martin (Fulham)


Johnson Smith, Sir Geoffrey
Stewart, Allan (Eastwood)


Jones, Gwilym (Cardiff N)
Stewart, Andrew (Sherwood)


Jones, Robert (W Herts)
Stradling Thomas, J.


Joseph, Rt Hon Sir Keith
Sumberg, David


Key, Robert
Taylor, Teddy (S'end E)


Kilfedder, James A.
Temple-Morris, Peter


King, Roger (B'ham N'field)
Terlezki, Stefan


King, Rt Hon Tom
Thompson, Donald (Calder V)


Knight, Greg (Derby N)
Thompson, Patrick (N'ich N)


Knight, Dame Jill (Edgbaston)
Thorne, Neil (Ilford S)


Knowles, Michael
Thornton, Malcolm


Knox, David
Thurnham, Peter


Lang, Ian
Townend, John (Bridlington)


Latham, Michael
Tracey, Richard


Lawler, Geoffrey
Trotter, Neville


Lawson, Rt Hon Nigel
Twinn, Dr Ian


Lee, John (Pendle)
van Straubenzee, Sir W.


Leigh, Edward (Gainsbor'gh)
Vaughan, Sir Gerard


Lennox-Boyd, Hon Mark
Viggers, Peter


Lewis, Sir Kenneth (Stamf'd)
Waddington, David


Lloyd, Peter, (Fareham)
Wakeham, Rt Hon John


Lord, Michael
Waldegrave, Hon William


McCurley, Mrs Anna
Walden, George


MacKay, John (Argyll &amp; Bute)
Walker, Bill (T'side N)


Maclean, David John
Walker, Rt Hon P. (W'cester)


Major, John
Wall, Sir Patrick


Marland, Paul
Waller, Gary


Mates, Michael
Ward. John


Mather, Carol
Wardle, C. (Bexhill)


Maude, Hon Francis
Warren, Kenneth


Meyer, Sir Anthony
Wells, Bowen (Hertford)


Mills, Sir Peter (West Devon)
Wells, Sir John (Maidstone)


Moate, Roger
Wheeler, John


Monro, Sir Hector
Whitfield, John


Moore, John
Whitney, Raymond


Morris, M. (N'hampton, S)
Wiggin, Jerry


Moynihan, Hon C.
Wilkinson, John


Needham, Richard
Winterton, Mrs Ann


Newton, Tony
Wolfson, Mark


Normanton, Tom
Wood, Timothy


Norris, Steven
Woodcock, Michael


Page, Richard (Herts SW)
Yeo, Tim


Pollock, Alexander
Young, Sir George (Acton)


Powley, John
Younger, Rt Hon George


Prior, Rt Hon James



Renton, Tim
Tellers for the Ayes:


Rhodes James, Robert
Mr. Tim Sainsbury and Mr. Michael Neubert.


Roberts, Wyn (Conwy)



Robinson, Mark (N'port W)





NOES


Abse, Leo
Archer, Rt Hon Peter


Anderson, Donald
Ashdown, Paddy





Ashton, Joe
Gould, Bryan


Atkinson, N. (Tottenham)
Gourlay, Harry


Bagier, Gordon A. T.
Hamilton, James (M'well N)


Barnett, Guy
Hamilton, W. W. (Central Fife)


Barron, Kevin
Hardy, Peter


Beckett, Mrs Margaret
Harman, Ms Harriet


Bell, Stuart
Harrison, Rt Hon Walter


Benn, Tony
Hart, Rt Hon Dame Judith


Bennett, A. (Dent'n &amp; Red'sh)
Hattersley, Rt Hon Roy


Bermingham, Gerald
Heffer, Eric S.


Bidwell, Sydney
Hogg, N. (C'nauld &amp; Kilsyth)


Blair, Anthony
Holland, Stuart (Vauxhall)


Boothroyd, Miss Betty
Home Robertson, John


Boyes, Roland
Howell, Rt Hon D. (S'heath)


Bray, Dr Jeremy
Howells, Geraint


Brown, Gordon (D'f'mline E)
Hoyle, Douglas


Brown, Hugh D. (Provan)
Hughes, Dr. Mark (Durham)


Brown, N. (N'c'tle-u-Tyne E)
Hughes, Robert (Aberdeen N)


Brown, R. (N'c'tle-u-Tyne N)
Hughes, Roy (Newport East)


Brown, Ron (E'burgh, Leith)
Janner, Hon Greville


Bruce, Malcolm
John, Brynmor


Buchan, Norman
Johnston, Sir Russell


Caborn, Richard
Jones, Barry (Alyn &amp; Deeside)


Callaghan, Rt Hon J.
Kennedy, Charles


Callaghan, Jim (Heyw'd &amp; M)
Kilroy-Silk, Robert


Campbell, Ian
Kirkwood, Archy


Campbell-Savours, Dale
Lambie, David


Carlile, Alexander (Montg'y)
Lamond, James


Carter-Jones, Lewis
Leadbitter, Ted


Clark, Dr David (S Shields)
Leighton, Ronald


Clarke, Thomas
Lewis, Ron (Carlisle)


Clay, Robert
Lewis, Terence (Worsley)


Clwyd, Mrs Ann
Litherland, Robert


Cocks, Rt Hon M. (Bristol S.)
Livsey, Richard


Cohen, Harry
Lloyd, Tony (Stretford)


Coleman, Donald
Loyden, Edward


Concannon, Rt Hon J. D.
McCartney, Hugh


Conlan, Bernard
McDonald, Dr Oonagh


Cook, Robin F. (Livingston)
McGuire, Michael


Corbett, Robin
McKay, Allen (Penistone)


Cowans, Harry
McKelvey, William


Cox, Thomas (Tooting)
MacKenzie, Rt Hon Gregor


Craigen, J. M.
McNamara, Kevin


Crowther, Stan
McTaggart, Robert


Cunliffe, Lawrence
McWilliam, John


Cunningham, Dr John
Madden, Max


Dalyell, Tarn
Marek, Dr John


Davies, Rt Hon Denzil (L'lli)
Marshall, David (Shettleston)


Davies, Ronald (Caerphilly)
Martin, Michael


Davis, Terry (B'ham, H'ge Hl)
Mason, Rt Hon Roy


Deakins, Eric
Maxton, John


Dewar, Donald
Maynard, Miss Joan


Dixon, Donald
Meacher, Michael


Dobson, Frank
Meadowcroft, Michael


Dormand, Jack
Michie, William


Douglas, Dick
Millan, Rt Hon Bruce


Dubs, Alfred
Miller, Dr M. S. (E Kilbride)


Duffy, A. E. P.
Mitchell, Austin (G't Grimsby)


Dunwoody, Hon Mrs G.
Morris, Rt Hon A. (W'shawe)


Eadie, Alex
Morris, Rt Hon J. (Aberavon)


Eastham, Ken
Oakes, Rt Hon Gordon


Edwards, Bob (W'h'mpt'n SE)
O'Brien, William


Evans, John (St. Helens N)
O'Neill, Martin


Ewing, Harry
Orme, Rt Hon Stanley


Fatchett, Derek
Park, George


Faulds, Andrew
Parry, Robert


Field, Frank (Birkenhead)
Patchett, Terry


Fields, T. (L'pool Broad Gn)
Pavitt, Laurie


Fisher, Mark
Pendry, Tom


Flannery, Martin
Penhaligon, David


Foot, Rt Hon Michael
Pike, Peter


Forrester, John
Powell, Raymond (Ogmore)


Foster, Derek
Prescott, John


Fraser, J. (Norwood)
Radice, Giles


Freeson, Rt Hon Reginald
Randall, Stuart


Freud, Clement
Redmond, M.


Garrett, W. E.
Rees, Rt Hon M. (Leeds S)


George, Bruce
Richardson, Ms Jo


Gilbert, Rt Hon Dr John
Roberts, Ernest (Hackney N)


Godman, Dr Norman
Robertson, George






Robinson, G. (Coventry NW)
Skinner, Dennis


Rogers, Allan
Smith, Cyril (Rochdale)


Rooker, J. W.
Smith, Rt Hon J. (M'kl'ds E)


Rowlands, Ted
Snape, Peter


Ryman, John
Soley, Clive


Sedgemore, Brian
Steel, Rt Hon David


Sheerman, Barry
Stott, Roger


Sheldon, Rt Hon R.
Strang, Gavin


Shore, Rt Hon Peter
Straw, Jack


Short, Ms Clare (Ladywood)
Taylor, Rt Hon John David


Short, Mrs R.(W'hampt'n NE)
Thomas, Dafydd (Merioneth)


Silkin, Rt Hon J.
Thomas, Dr R. (Carmarthen)





Thompson, J. (Wansbeck)
Wigley, Dafydd


Thorne, Stan (Preston)
Williams, Rt Hon A.


Tinn, James
Winnick, David


Torney, Tom
Woodall, Alec


Wainwright, R.
Young, David (Bolton SE)


Warden, Gareth (Gower)



Wareing, Robert
Tellers for the Noes:


Weetch, Ken
Mr. Frank Haynes and Mr. Sean Hughes.


White, James

Question accordingly agreed to.

Rate Support Grant (Wales)

The Secretary of State for Wales (Mr. Nicholas Edwards): I beg to move,
That the Welsh Rate Support Grant Supplementary (No. 2) Report 1983–84 (House of Commons Paper No. 448), which was laid before this House on 4th July, be approved.
I hope that it will be convenient if at the same time we discuss the Welsh Rate Support Grant Supplementary Report 1985–86 (House of Commons Paper No. 449).

Mr. Ray Powell: On a point of order, Mr. Speaker. We have all received copies from the Vote Office of the reports on which the Secretary of State for Wales is just about to speak, and I seek your guidance. Earlier this evening, when we were debating the report on which we have just voted, a point of order was raised about discrepancies amounting to some £1 million. That affects the figures on page 27 of that report and all local authorities in England. Indeed, only 12 months ago the Secretary of State for Wales had to admit to the House that many mistakes were contained in the report that was then debated. The treasurers of all the Welsh local authorities have estimated future rates assessments on the figures that have been published in the two booklets that were available to the House on 4 and 9 July. Can you assure us that the Secretary of State will give a personal assurance, before any statement is made, that all the figures contained in those documents are absolutely and perfectly correct? It would be pointless for the House to debate this issue unless we can have that clear assurance.
The treasurer of the Ogwr borough has sent me a list of detailed percentages and estimated rate grants since 1981–82. He has also highlighted the difficulty faced by all the councillors in that borough—half of whom I represent—in trying to fix a rate assessment to the figure to which the Secretary of State has instructed them to adhere.
In order to ensure that in no way will they be subjected to an order by the Secretary of State if they overspend, can we have an assurance that the figures given to those treasurers are perfectly and absolutely correct? Unless we can have such an assurance, I am sure, Mr. Speaker, that you will agree that unfortunately the House will be unable to continue with this debate.

Mr. Nicholas Edwards: Further to that point of order, Mr. Speaker. It may help the House if I say that I express regret that the report as laid—the Welsh Rate Support Grant Supplementary (No. 2) Report 1983–84—contains some small printing errors that were corrected by the issue of a printed slip that was placed with the reports in the Vote Office. As I think the hon. Member for Ogmore (Mr. Powell) knows, I wrote to all Welsh Members on 15 July drawing attention to these corrections. The same corrections are also being drawn to the attention of the local authorities in Wales. I am sorry that these printing errors have occurred, but we have corrected them in advance. I have already looked in the reports lying on the Table, and see that the errata slips are correctly with them. I therefore hope that there will be no inconvenience to the House.

Mr. Ray Powell: Further to that point of order, Mr. Speaker. Surely that admission alone proves conclusively

that it is not possible to debate this issue. The two reports are confusing in themselves, but we must then find two small slips and try to adjust the figures. What on earth is the Secretary of State trying to do to people in Wales?

Mr. Ted Rowlands: How many millions of slips have gone out?

Mr. Powell: As my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) has said, how many millions of slips have gone out? Many people in Wales are concerned about these orders. What effect will the mistakes by the Welsh Office have on the people of Wales? These mistakes were made 12 months ago, and one would have thought the Government could have righted the wrongs and given us a true and proper statement.

Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. That is not a point of order for me. It is a matter for the Government, not for the Chair.

Mr. Donald Coleman: The Secretary of State for Wales said he had sent these slips to Welsh Members. But this order concerns not only Welsh Members; English and Scottish Members will be voting on it. What information have they been given?

Mr. Nicholas Edwards: I was careful to say that correction slips had been placed with the orders in the Vote Office, and that I had checked that the orders lying on the table had correction slips with them. I was most careful to ensure that all hon. Members and not just Welsh Members would have the correction slips available.

Mr. Barry Jones: The right hon. Gentleman does not seem to be able to answer my hon. Friend the Member for Ogmore (Mr. Powell). I understand that the figures are not exactly trifling. The errors total £45 million and £3·4 million.

Mr. Edwards: These reports put into effect a number of adjustments to the rate support grants payable to local authorities in Wales, the details of which I will come to in a moment. The reports have a wider significance because they help to highlight the part that most local councils in Wales are playing in achieving a more effective use of resources and the better balance between private and public sector resources that is fundamental to the task of regenerating the Welsh economy. In the present year, 1985–86, local authorities have come near to achieving the targets I have set for local government spending, with responsible rating decisions by most of them. This is welcome news to ratepayers and to all those who wish to see Wales become an even more attractive location for commerce and industry.

Mr. Ray Powell: I should like to come back to the target figure. Can we have the Secretary of State's assurance that the target figures he has talked about and which have been issued to local authorities are correct.

Mr. Edwards: I can tell the hon. Gentleman that the errors which have been identified are not in the order, which deals with the targets for the current year, but in the final winding up order. We have drawn them to the attention of the House and they are not difficult to comprehend. As I said, I have taken the trouble to write to the hon. Member for Alyn and Deeside (Mr. Jones) and I have sent correction slips to Welsh Members and placed slips in the House before the debate.

Mr. Alan Williams: Will the Secretary of State answer my hon. Friend? Is he giving us a categorical assurance that all the other figures are absolutely correct and that he stands by them?

Mr. Edwards: I am coming to the House on the basis that the figures are correct. If any Member of the House were to guarantee that nowhere was there a semi-colon out of place, he would be very rash indeed. I can certainly give the assurance that these documents have been very carefully checked, some typographical errors having been discovered. On that basis I am presenting them to the House and hope they will be approved.
The record of Welsh local government in meeting the targets speaks for itself. In the first year of the separate Welsh arrangements, 1981–82, total expenditure was about £48 million or 4·4 per cent. above target. In current expenditure terms, the excess was £41 million or 4 per cent. In the present year budgeted total expenditure exceeds my target by only £4·6 million or 0·3 per cent. with a current expenditure excess of £14 million or 1 per cent. I have every hope that by next year that final 1 per cent. will have been eliminated and that local authority current expenditure in Wales will have returned in real terms to the level at which it was when we took office in 1979. It is worth emphasising that that is my objective—to bring local authority spending back to the level at which it was when we took office.
I acknowledge that halting the upward spiral of local authority current spending has not been achieved without a great deal of effort on the part of local government. Councils have been obliged to make a careful reassessment of priorities and to pursue greater efficiency, and I thank them for their efforts. More important than any thanks or commendations from me, however, there have been some very important consequential benefits.
First, rates in Wales have risen on average by less than the rise in inflation since 1981–82. Secondly, despite the reduced rate of growth in current spending local authorities have been able broadly to maintain, and in some cases to improve, the level of key services. Expenditure on the police has increased by 18 per cent. more than the rise in costs in the economy as a whole during the period 1979–80 to 1985–86. Spending on personal social services has grown by 9 per cent. with significant increases in the number of social workers and home helps. Residential provision has expanded and I have been able to introduce an initiative for the mentally handicapped which is initially 100 per cent. grant aided. Current spending on the urban programme has more than doubled in cost terms and an even greater growth has been achieved on the capital account. We have heard loud complaints about insufficient resources being available for education, but education spending has increased, despite the large fall in pupil numbers. Last, but not least, the achievement of local authorities in limiting their current spending has enabled me to release considerable additional resources for capital spending. Since 1981–82, when I assumed direct responsibility for rate support grant and capital allocations in Wales, gross capital spending by local authorities has risen by 46 per cent. or twice as fast as inflation.
The Welsh Rate Support Grant Supplementary (No. 2) Report 1983–84 finalises the rate support grant for that year. The first supplementary report for 1983–84, approved by the House in July 1983, withheld £12·6 million grant in respect of a gross spending excess at

budget stage of £22·7 million. Outturn figures now show that the gross excess, after disregards, has been reduced to £17·5 million. This enables me to reduce the amount of grant withheld by £2·6 million to £10 million. I welcome the fact that two county and five district councils have successfully brought their budgeted spending down to target and now, in common with the large majority of other councils, avoid any grant penalties at all. The £3·5 million in grant previously withheld from those authorities will be restored to them by means of this supplementary report. Sadly, three authorities—Clwyd, Mid-Glamorgan and Ogwr—have actually increased expenditure between budget and outturn, resulted in additional holdback of £421,000, £844,000 and £446,000 respectively. Grant penalties for those authorities are accordingly increased.
At this point I must refer to the report in last Thursday's Western Mail which alleged that the grant adjustments made by this report to reflect the actual level of interest rates in 1983–84 came as a "bombshell" to local authorities. I find that allegation astonishing. By a longstanding convention, agreed with the local authority associations, interest rates have always been adjusted in final RSG reports. Adjustments in grant for this reason were made in 1981–82 and in 1982–83, and I find it unbelievable that local authorities were unaware that interest rates were falling in 1983–84 and that this would mean that spending would fall as well as their entitlement to grant. The suggestion is absurd.
I see that, in the debate on the corresponding motion on 18 July last year, reported in Hansard Vol. 64, c. 416, I told the House that exactly the same thing had happened in 1982–83. I also told the House that the adjustment can work both ways. Indeed, strongly suspect that for 1984–85 the outcome will be an increase in grant. Every local authority knows perfectly well that, under successive Governments, adjustments of this kind have been made so that grant relates to actual expenditure. Adjustments of grant for this reason were made by the Labour Government in each of the years when they were last in office. Against that background it really would be a bombshell if any local authority treasurer did no know or failed to plan accordingly.

Mr. Allan Rogers: The Secretary of State said that grant has been adjusted to changes in interest rates. Can he explain the changes between 1981 and 1984 and say how much they have affected RSG for Welsh local authorities?

Mr. Edwards: The results of the changes are set out in the report. This is one of the consequences with which we are dealing. Perhaps the hon. Gentleman will wait until I give the total figures. If he has any questions about individual local authorities, perhaps I can deal with them when, with the leave of the House, I reply to the debate.
The article went on to suggest that the interest rate adjustment was the more painful because of higher spending on house renovation grants in 1983–84. However, the writer seemed to have overlooked the crucial fact that the Welsh Office provided 90 per cent. of the cash for financing these grants and that, in addition, the balance qualified for RSG support. The fact that only three districts have exceeded their target for 1983–84 reinforces the point that the improvement grant factor has been grossly overplayed.
The net effect of these technical changes—I am giving the figures for which the hon. Member for Rhondda


(Mr. Rogers) asked—made by the report is to reduce relevant expenditure by £6 million. The block grant element is reduced by £2·9 million—0·4 per cent.—but specific grants are increased by £3·4 million, resulting in a £0·5 million increase in aggregate Exchequer grant. Aggregate Exchequer grant is about 4 per cent. higher than in 1982–83.
Copies of the report have been sent to each local authority in Wales with details of their revised grant entitlement. Adjustments to the payment of grants will, of course, be consequential upon the House approving the report.

Mr. Allan Rogers: I did not ask the Secretary of State about the outturn figures and the total of grant available adjusted according to interest rates, but what the interest rates were. I understand that interest rates have increased and that therefore the total of grant going to local authorities should have gone up accordingly. Can the Secretary of State not give a simple answer to a simple question? How have interest rates varied during the past four years?

Mr. Edwards: We are dealing with a particular year in which interest rates fell. As a result, local government expenditure fell, and as a result of that, authorities are not entitled to as much grant. Last year in the same debate the hon. Member for Rhondda (Mr. Rogers) asked whether, if interest rates rose, a similar adjustment would be made upwards, and I said that it would. If he had listened earlier, he would have heard me repeat that advice in this speech. We make an estimate of what interest rates are likely to be in the year, and, like all our predecessors of both parties, when we know the actual interest rate totals at the end of the period, we make the corresponding adjustment.
The supplementary report for 1985–86 is based on local authorities' budgets. The main report for the year, which was approved by the House on 16 January 1985, set out the basis on which grant would be withheld from authorities planning to spend in excess of their expenditure targets. Of 45 county and district councils in Wales, no fewer than 40—six county councils and 34 district councils—are planning to spend at or below target. Overall, total spending is only £4·6 million or 0·3 per cent. above the aggregate target. At budget stage, that is a remarkably good performance by Welsh local authorities, and I am delighted to place on record my appreciation of their co-operation in seeking to restrain public spending.
The five authorities—two county councils, Dyfed and Mid Glamorgan, and three district councils, Merthyr Tydfil, Wrexham Maelor and Ynys Môn—planning to spend above target have a total gross overspend of £4·6 million. That is a large figure for such a small number of authorities, and I have no hesitation in putting into effect the holdback formula agreed by the House in January. Under the terms set out in the main report that amounts to £0·5 million. That is a direct and avoidable cost, which those authorities have asked their ratepayers to bear.
I hope that the authorities concerned will review their spending decisions carefully in the light of this supplementary report, as it is still open to them to adjust their spending between now and the end of the financial year. By living within the targets that I have set, they can rid themselves of the unnecessary burden of grant

holdback. Experience in 1983–84 shows that it is perfectly possible to get down to target by outturn, if the will is there.

Dr. John Marek: The Secretary of State put forward his view about Wrexham Maelor. In reality, the Wrexham Maelor borough council does not want to cut services to its citizens, which is why it has chosen its present course of action.

Mr. Edwards: I hope that Wrexham's ratepayers note that they are having a heavy unnecessary additional burden placed on them. It is one of only three Welsh district authorities which apparently must spend more than the targets. I do not believe that the great majority of district councils in Wales are uncaring or irresponsible about the needs of their local communities, and yet they have been able to live within the reasonable targets that I have set.
The marked reduction in overspending is welcome news for industry and commerce in Wales, and for the ratepayers of those authorities which are heeding our expenditure guidelines. Welsh local authorities are close to achieving the overall goal which I have set. I look forward with confidence to its achievement, with the benefits it will bring to taxpayer and ratepayer alike.
I commend the two reports to the House.

Mr. Barry Jones: It is fair to say that the Secretary of State's slip is showing tonight. I remind him of the incorrect figures of about £45 million for education and about £3·4 million elsewhere. It is wrong that so many of his senior officials shoud be involved in this retrograde and wretched system of targets and penalties. He should know that his officials could be far better employed than having to run this unpopular and unsuccessful system.
The right hon. Gentleman did not say that the scale of his penalties was draconian. I must protest about them, because in 1985–86, as a percentage of gross expenditure excess, these penalties now stand at 120 per cent. This is a crippling penalty to impose on Welsh local authorities. It was incredible to hear the Secretary of State boast that his objective was to return to 1979 levels of local government expenditure, when we know from debates and questions in the House that unemployment has increased by 125 per cent. since he became Secretary of State for Wales. The right hon. Gentleman should have said that he would give us more money, so that our local authorities could cope with the challenges which have been created by the failure of the Government's policies.
It should be said as loudly as possible throughout Wales that the Welsh rate support grant, as a percentage of expenditure, has been reduced from 72·5 per cent. in 1982–83 to 67 per cent. under the right hon. Gentleman's regime, about which he boasts. He has set our local authorities, which have major unemployment problems, a most difficult task.
The supplementary report for 1985–86 empowers the Secretary of State to put into effect the proposals set out in the original report, which involve the implementation Of target and penalty regimes. As for our eight county councils, this means that, because of an expenditure excess of just more than £4 million, there will be a witholding of grant of nearly £4·7 million. The same applies to Wales' 37 district councils. They budgeted to


spend £450,000 less than the Government's estimate of their total expenditure, but they will suffer a grant holdback of £855,000.
The supposed transgressors are Merthyr Tydfil, Wrexham Maelor and Ynys Môn. To put those figures into context, I remind the House that in the main report—

Mr. Ray Powell: My hon. Friend is right to say that Ynys Môn will be subject to holdback. Will he comment on the fact that that local authority is represented by a Conservative Member of Parliament, who used to be the Parliamentary Private Secretary to the Secretary of State? I wonder whether the hon. Member for Ynys Môn (Mr. Best) will comment later on the effect of this proposal on his local authority?

Mr. Jones: I understand the thrust of my hon. Friend's intervention. Perhaps the hon. Member for Ynys Môn (Mr. Best) will catch your eye later, Mr. Deputy Speaker, and can justify the penalisation of his local authority. We look forward to hearing his response to this unjust treatment of the island of Anglesey.
The Welsh local authorities will exceed the Secretary of State's expenditure estimate by only 0·3 per cent., but they will incur penalties of £5·5 million. We believe that the entire process is unfair. First, total expenditure is so close to the Government's original guidance figures that there is a reasonable case for suggesting that the Secretary of State should abandon his thumbscrew, financial torture penalties. If he will not go so far as to abandon the penalties, will he not say that the system is a farce or a black comedy, and even if he will not admit that his system is a ridiculous waste of his hard-pressed Department's time, the fact that the total grant holdback substantially exceeds the total expenditure excess is indefensible. Ministers have said that Wales' authorities have done well in operating the Government's guidelines, yet they persist in exacting savage penalties from vulnerable, hard-pressed local authorities which are trying to cope with the aftermath of the Government's failed economic policies.

Mr. Peter Hubbard-Miles: Is the hon. Gentleman aware that in Mid-Glamorgan the Audit Commission has recently identified savings of nearly £2 million which are achievable in just two areas of local government, school meals and further education, and that such savings would be more than the grant holdback?

Mr. Jones: I find it incredible that the hon. Gentleman, a Member from the area of the Mid-Glamorgan county authority, should sneakily be attacking his own county, when he should be demanding of his right hon. Friend more and more money to help the most socially deprived local authority in Britain. It is a disgraceful posture for the hon. Gentleman to adopt, and he should be ashamed of himself.
The reports are a cruel nonsense. The system is discredited tonight by the mistake for which the right hon. Gentleman had to make a wretched apology. It is a Gilbert and Sullivan situation: the crime is small and the punishment is severe. The Minister has declared financial war on Merthyr Tydfil. Long-term unemployment in Merthyr is 47 per cent. of all unemployment. Male unemployment in that beleaguered community stands at 23·7 per cent.
My hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) has taken me to his

constituency. I have seen the dereliction and the problems in housing and the need for reclamation of industrial land. It is incredible that this Secretary of State should want to penalise one of the ablest of local authorities, with one of the biggest sets of problems in the Principality.
The right hon. Gentleman forgets that, in the fair island of Anglesey, Holyhead has 3,670 workless people. The male unemployment rate there is 23·9 per cent. and the female unemployment rate is 17·7 per cent. Yet he wishes to attack Ynys Môn and penalise it heavily. It looks as though he will have the willing aid of the hon. Member for Ynys Môn. We shall watch with interest to see how he votes tonight. [Interruption.] Yes, he has fled the Benches because he is too embarrassed by the reality of the situation.
The right hon. Gentleman wishes to penalise Wrexham harshly. I remind him that unemployment in that constituency stands at 19 per cent.
I also remind the right hon. Gentleman that the Dyfed dole queue exceeds 18,000 and that in Mid-Glamorgan it is 34,000, the highest in Wales. Mid-Glamorgan is the seat of some of Europe's most serious social and economic problems, and without any doubt it is the source of Britain's worst housing problems. Yet the Secretary of State has sanctioned grant holdback of £3·1 million from his own county, Dyfed. The people of Dyfed believe that the right hon. Gentleman's policies are operating an unjust and very spiteful system.
It is true that in the second report for 1983–84 the grant holdback penalties of £10 million are less than predicted in the first supplementary report for that year. Of the Welsh districts, 37 exceeded the Government's estimate by only 0·1 per cent. Yet three districts—Merthyr, Ogwr and Wrexham Maelor—suffered penalties nearly two and three quarter times the total expenditure excess. That illustrates the stupidity and the iniquity of the system.
The Secretary of State did not dwell on it for long, but the Government have reduced relevant expenditure and grant. The Welsh districts' block grant before holdback penalties has effectively been reduced by 3·75 per cent. Some of our districts have had huge reductions. Man, under the heading of reduced relevant expenditure and grant, has suffered a reduction of 18 per cent., which amounts to about £380,000. Torfaen has had a reduction of 9.8 per cent. while the reductions for Swansea and Alyn and Deeside have been 7·4 per cent. and 5·4 per cent. respectively. For Alyn and Deeside—my own constituency—to lose £140,000 is a hammer blow. The authority is endeavouring to modernise homes, to attract new industries and to cope with a male unemployment rate of one in five. We think that the Government have kicked us in the teeth.

Mr. Nicholas Edwards: Will the hon. Gentleman give way?

Mr. Jones: If the right hon. Gentleman is prepared to acknowledge that he has kicked us in the teeth, yes.

Mr. Edwards: The reductions which the hon. Gentleman has quoted, including Alyn and Deeside, are about 90 per cent. due to the reduction in interest rates. The authorities have had to pay lower interest rates and have had lower expenditure. Therefore, they are entitled to a lower level of grant. For that reason, we have made the same adjustment as that which was made in every year of the previous Labour Government.

Mr. Jones: The right hon. Gentleman should spend more time with the Association of District Councils in Wales, which will not find that explanation sufficient. It is angry. For the district councils which lose relevant expenditure and grant—27 of the 37 lose—it is not good enough to be so informed in the report about 18 months after the closing of their books. The district authorities believe that this is an instance of the Government being guilty of a special sort of incompetence.

Mr. Allan Rogers: The Secretary of State has given a specific figure for the reduction in rate support grant to Alyn and Deeside, but he has still not said by how much interest rates have fallen over the period for which he has calulated the outturn. If he is saying that all the outturns in Wales and the reductions in grant to local authorities are the result of the reduction in interest rates, is he saying that there have been no penalties or cuts in Wales?

Mr. Jones: My hon. Friend has pinned down the right hon. Gentleman, from whom we have had no assurances and no clear explanation in response to my hon. Friend's cogent argument. As I was about to say before I was so cogently interupted, rate support grant for Wales has been reduced by £5·5 million before holdback since the main order. Is it not the case that nearly all of the reduction—about £5·4 million—has been borne by the Welsh districts.
I deal next with the position of the counties in the 1983–84 report. Clwyd, Mid-Glamorgan and West Glamorgan have been slammed viciously for overspending. I should tell the House that their budgets involve hundreds of millions of pounds. However, the grant holdbacks total over £9 Million. The counties are struggling desperately to cope with the coal and steel closures. The Mid-Glamorgan authority must now endure a series of agonising coalmine closures in valley communities, where the prospects of locating new industries must be almost nil in today's climate. I ask the Secretary of State and his junior Ministers to visit Mardy and Maesteg, which are the scenes of imminent pit contractions and closures. If they do, they will realise that it is monstrous to penalise by over £4 million Mid-Glamorgan, where unemployment, ill health and unfit housing exist to an alarming degree, and, arguably, to a degree not experienced anywhere else in the United Kingdom.
West Glamorgan and Clwyd, the other errant counties, are still reeling from the 1980 steel closures.

Mr. Coleman: My hon. Friend referred to the penalties imposed on local authorities and related them to unemployment. Does he think that next year West Glamorgan and the borough of Neath, which face about 1,000 job losses, will be penalised because the local authority may want to spend money to help unemployment?

Mr. Jones: My hon. Friend clearly fears the worst. He has received no assurances in response to his recent substantial questioning of the Secretary of State. My hon. Friend may well draw the worst conclusions in view of the Secretary of State's silence tonight and previously.
The Courtaulds closures in Clwyd have made the task of creating a new economy immensely difficult. The loss of 1,100—

Mr. Ian Grist: The hon. Gentleman makes a fair point when he talks about the difficulties which local authorities face with the closure of steel and other plants. I am sure he will agree that any threat to close Llanwern would be a catastrophe for my constituents and the borough of Newport in the county of Gwent. In which case, why did he and so many of his colleagues support the miners' strike, which threatened the future of that plant?

Mr. Jones: At this late hour we should be spared such petty, snivelling interventions. It was a most unworthy intervention. The hon. Gentleman unwittingly makes my case. He concedes that local authorities must face the consequences of closures. Why does he not denounce his right hon. Friend, who has boasted that he wishs to get local authority expenditure back to 1979 levels, which was before the closures took place? The hon. Gentleman's intervention clearly lacked logic. There is clearly a lack of good intent in the right hon. Gentleman's strategic and tactical policy.
The loss of 1,100 Courtaulds manufacturing jobs and the P.D. Cans venture is a major blow. It is perverse of the Government to penalise my county, which has 24,000 jobless citizens, when it is striving ably to improve the social and economic infrastructure.
West Glamorgan, as my hon. Friend the Member for Neath (Mr. Coleman) stressed, suffers in parallel. Neath has lost about 1,000 jobs in two months. The BP job losses rival in seriousness the loss of the Courtaulds jobs.
I wish to raise the issue of council house sales receipts, against the background that these reports release insufficient moneys. The districts are bitter. There are 66,000 renovation grants outstanding. Their cost may exceed £231 million. Four years will be needed before we can attempt to clear the backlog. Why do the Government not release their hold on that cash? Why does Wales suffer a 15 per cent. capital receipts limit? Our valley communities, steel and quarry towns desperately need housing cash. Why can the English authorities use 20 per cent. of their receipts? Why does the right hon. Gentleman acknowledge and accept that inequity? He has never explained the discrimination. He should do that tonight if he catches your eye, Mr. Deputy Speaker, because my right hon. and hon. Friends are deeply worried by the Augean stable of rotten housing in the valleys, and they see no prospect from these reports of ever having the money to put it right. Our people are suffering because of the right hon. Gentleman's failure to win the battle in the Cabinet.
The blunt truth is that the Government come to the House seemingly oblivious to the message from the electors of Brecon and Radnor.

Mr. Rowlands: Are the Government aware that the Green Paper on housing grants proposes moving from grants to loans, but that a condition of that is that all outstanding applications be fulfilled and 90 per cent. grants be made? When do the Government expect to fulfil that agreement?

Mr. Jones: We will look forward with interest, if the Secretary of State catches your eye, Mr. Speaker, to hearing his answer to that important point.
The message of the electors of Brecon and Radnor should be clear to the Government. Ordinary people throughout Powys complained about the decline in the


services delivered by local councils. They said that the councils were without adequate finance, and they knew that services would continue to decline in quality and extent. We noted that parents were at their wits' end because of the never-ending cuts at schools. Residents noted the squalor of the learning environment, were in despair at the dog-eared books, the increasing reliance on work sheets and the narrowing of the curriculum, and the loss of the teaching staff. They complained about all those things, and there is nothing in the report to show that the moneys to stem the adverse tide will become available.
Everybody complains about the increase in vandalism, in burglaries, in theft and fraud, but our police forces are cut or are insufficient. Although these financial reports are abstract and complex, they guarantee a continuing steep decline in the quality of life for the Welsh people. The Secretary of State operates a discredited, unjust local government regime. The Labour party is committed to local government democracy in Wales. We shall dispel the poison in the local government system. Our approach will be based on local democratic control, clear local accountability, and a local choice within a national framework. We will give greater importance to social needs, to economic problems and deprivation.

Mr. Ray Powell: On a point of order, Mr. Deputy Speaker. I notice that behind the Chair some advice is being given to Tory Members. Is that available to Labour Members?

Mr. Deputy Speaker: That is not a matter for the Chair.

Mr. Powell: I am asking for a ruling on that point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker: I am giving a ruling. Nothing has occurred that is out of order.

Mr. Powell: Further to that point of order, Mr. Deputy Speaker. May I go along to the Box and ask for the information that was given to the hon. Member for Ynys Môn (Mr. Best)?

Mr. Deputy Speaker: It is not for me to advise the hon. Gentleman. Nothing has occurred that is out of order.

Mr. Jones: I respect your ruling, Mr. Deputy Speaker. It became clear to my eagle-eyed Friend the Member for Ogmore (Mr. Powell) that the hon. Member for Ynys Mon was going to the Officials' Box to attempt to get answers. The hon. Gentleman knows that if he catches your eye in this debate he will have a difficult task justifying the penalties against his local authority. That is why my hon. Friend intervened.
The Labour party will make sure that the hated Rates Act and the unjust targets and penalties regime will go. The Secretary of State must abandon his penalties and targets, restore democracy to the local government scene, and acknowledge the folly of the system that he has introduced.

Mr. Geraint Howells: Nowhere more than in Wales have the Government's unjustified penny-pinching attitudes towards local government been resented, as recent events in Mid-Wales have amply demonstrated. Should I mention Brecon and Radnor here this evening?

Mr. Alex Carlile: Yes.

Mr. Richard Livsey: Yes.

Mr. Howells: I am delighted that the new hon. Member for Brecon and Radnor (Mr. Livsey), my hon. Friend, has been able to join my hon. and learned Friend the Member for Montgomery (Mr. Carlile) and myself on these Benches. I am sure that he will stay with us for many years to come.
I have referred to Brecon and Radnor. The Secretary of State said that the rates have risen very little in Wales during the past 12 months—not higher than the rate of inflation. However, the Local Government Chronicle of 14 June 1985, refers on page 678 to
The rises in Brecknock (13·9 per cent.) and Radnor (15·4 per cent.)".
No wonder the electorate in Brecon and Radnor made sure that the Tories would be ousted in the constituency, arid have elected my colleague to represent them.
People are rightly blaming the Government for inadequate and even dangerous school buildings, for the limited facilities offered our schoolchildren, and for the lack of provision of even the most basic materials in some schools in Wales. Highly placed officials in the education service have been quoted as saying how they were first motivated in their work by the desire to bring about an improvement and expansion in education, but were now having to spend their time trying to limit the damage to a whole generation of children that will result from severe cutbacks imposed on local authorities by central Government.

Mr. Alex Carlile: Is my hon. Friend aware that teachers in high schools in Wales are now in despair at the amount of time that they have to spend writing and typing out worksheets for their pupils because there is not money available to buy textbooks for those pupils? Is he further aware that that is even so with students who are studying specialist subjects for A-level?

Mr. Howells: I entirely agree with the sentiments expressed by my hon. and learned Friend. It makes us wonder whether the Secretary of State is aware of the problems in many of the high schools and whether he cares for the children who live in our communities.
Likewise, the money for road improvements is not being made available, and the tremendous backlog in housing maintenance and repair throughout Wales is rapidly becoming a national scandal. Various Ministers have been trying to stem the tide of discontent against the Government by blaming the local authorities, but that is manifestly unfair. Local authorities in Wales, as elsewhere, have been forced to budget in the most insecure conditions. They must feel at times that they are treading on quicksands. It is now surely time that the Government tried to build greater stability into the rate support grant formula to give local authorities greater certainty about their block grant entitlement. It is now 12 months since local authorities closed their accounts for 1983–84, yet we have before us a report that changes the grant entitlement for individual authorities quite significantly in some cases. For example, Ceredigion district council will lose approximately £28,000 this year in respect of 1983–84. It is obvious that since the introduction in 1981 of the present rate support grant system it has been used more and more as an instrument by which central Government are attempting to control the level of local authority spending and, by that means, undermining local democracy. Do the Government intend to perpetuate this policy?
In the shorter term, will the Minister assure the House that provision for education, roads and housing will not be further damaged by the Government's short-sighted policy towards the funding of local government?
I hope that the Minister will say how many employees in local government have been made redundant in the last 12 months and how many are likely to be made redundant in local government in the coming two years due to the Government's policy, which is having a disastrous effect on Wales and its people.

Mr. Keith Best (Ynys Môn): I welcome the opportunity that the hon. Member for Ogmore (Mr. Powell) took of going to the Officials' Box. Any information that might improve the quality of his speeches is a welcome addition, though as he has disappeared so rapidly from the Chamber he can only have received unwelcome news. Judging from the concentrated look of despair that he always seems to wear on his visage, the news that he received could not have been particularly apposite to the case that he might have sought to advance had he chosen to remain in his place. However, one must not be too beastly towards him.

Mr. Hubbard-Miles: Does my hon. Friend think that the news he got was that in 1983–84, when the figure was withheld, Ogwr borough council borrowed £6 million from merchant bankers, not to provide housing for the needy but to provide new council offices and a leisure centre?

Mr. Best: I am grateful to my hon. Friend for making that point, because his knowledge of these matters is profound. One reason why the hon. Member for Ogmore may have disappeared so rapidly from the Chamber is that not only his local authority but most Labour-controlled local authorities in the Principality do not have a happy story to tell about the way in which they spend their ratepayers' money.
Ynys Môn, my local authority, has been mentioned as one of those which will suffer a penalty. I wish to place on record the exact nature of that overspend. From a target of £5,149,000, the total expenditure comes out at £5,318,720, an overspend of £169,720. I hope that the Secretary of State acknowledges that that is a good attempt to stay within the target.
The Secretary of State will be the first to acknowledge that the borough of Ynys Môn has particular difficulties to confront, especially in housing, with about 900 applications for housing improvement grants waiting to be satisfied. There is little prospect of their being satisfied in the near future unless further money is made available, and my right hon. Friend knows my views on the release of further capital receipts to try to satisfy that demand. He will also be aware of the severe unemployment problem in Ynys Môn, with 22 per cent. male unemployment.
My local authority has concentrated on alleviating the unemployment problem. The establishment of an economic development unit has been the latest step in that endeavour. A local authority in an area where there is high unemployment can be expected to spend more than authorities in areas where the problem is not so severe. I hope that my right hon. Friend the Secretary of State will soon be able to announce what we would both like—

targets will be done away with and we will return to a more sensible element of establishing local government expenditure.
Targets are only a temporary measure, as has been repeatedly acknowledged. They are an unwelcome measure, however necessary they are. I hope that the time when they can be done away with altogether is rapidly approaching. This does not detract from central Government's problem of trying to resolve the conflict between local government autonomy—every hon. Member believes that every local authority should have as much say as is commensurate with central Government's overall duty—namely control of overall identifiable public expenditure.
The manifest failure of the Opposition parties to address their minds to that central question removes all credibility from the speeches by the Opposition. Until they address their minds to how to enable central Government to control overall public expenditure, of which local government expenditure is a significant part, and give local government autonomy that is commensurate with the expression of will of the ratepayers through the ballot box, there will not be a comprehensive and cohesive Opposition policy. At least the Government have tried to resolve that difficulty in a short-term, in many ways unsatisfactory, measure by the introduction of targets. There seemed to be little alternative to that measure.
I hope that, because of the responsibility that local government has shown in the Principality—to a greater extent than in England—we are approaching a period when the Principality will return to a more sensible resolution of local government finance. My right hon. Friend the Secretary of State does not need me to remind him that the local authorities' success in Wales is his success, and vice versa. Central and local government must work hand in glove, because it is to the overall benefit of the people—whether taxpayers or ratepayers—that expenditure should be kept to levels that the country can afford.
That point must not escape the notice of every hon. Member participating in this debate. Unfortunately, the hon. Member for Alyn and Deeside (Mr. Jones) and the hon. Member for Ogmore, who has rapidly departed rabbit-like, have not addressed their minds to that aspect. They do not therefore provide a credible alternative to the Government's measures.

Dr. Roger Thomas: I very much regret the last couple of sentences by the hon. Member for Ynys Môn (Mr. Best). Perhaps they were uncharacteristic of him.
It is essential to allow democratically elected members to put into operation services that are compatible with local needs and interests at levels of provision thought necessary by those with local government concerns. That proviso should be accepted by all honest, decent-thinking people. Restrictions in this direction have to be resisted.
One must admit that RSGs and GREs are complex. Earlier in the debate they were regarded as being Byzantine, and that is possibly under-estimating the situation. But they are affecting more and more the lives of every elector in the electorates we serve. Political issues these days are often divided into national and domestic issues. It was said that at the recent by-election domestic


issues took precedence over national issues. That is not surprising, because the community is becoming more and more sophisticated, and more and more it thinks for itself.
One of the things I have noticed is that these days the community values, to a greater extent than ever before, the wide range of services provided under the auspices of local authorities, and there is now solidifying a determination to defend those services against the onslaught of central government. Nowhere is this more clearly defined than in the defending of services provided by social service departments. Yet within county councils a continuing battle goes on to tailor restricted finances to growing demands. It is a miserable sight to behold the genuine and heart-searching efforts of elected councillors being belittled and sometimes denigrated by those pursuing political dogma.
Restricted local government financing has the most widespread repercussions and ramifications. Ministers, and particularly the Minister of State, must be sick and tired of representations which I and other hon. Members make about the effect of unemployment upon certain areas within the county of Dyfed. Nowhere is that more apparent than in the fact that Dyfed county council does not have enough money to spend on roads leading north and west from Carmarthen, north and west from the termination of the A4, in order to bring down unemployment rates in that area. We had a disaster in that area when the creamery was closed at Newcastle Emlyn. We are not prepared to accept another disaster if this process of contractorisation, or privatisation under another name, is to take place at Aberforth in the constituency of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells). We warn the Government that we will not accept that.
We in Dyfed will fight the Government on these issues. The Government are penalising us now, but there will be a solid opposition in Dyfed. I appeal to the Liberal party to have some influence upon Liberal members in Dyfed county council, so that we can present a united front and face these penalties. We will be honoured and supported by farming people in Dyfed.

Mr. Dafydd Wigley: Reference has been made to the Brecon and Radnor by-election, but I do not want to go on too long about that. There is a message which Conservative Members should take to heart, and it is that people put a value on services. They put a greater value on real value for money services than they do on an additional penny on the rates, provided that that penny is being spent in a way which meets their requirements. That is something the Government will forget at their peril in all parts of Wales and elsewhere when it comes to an election.
In the papers before us, we are seeing yet further penalisation of areas, particularly rural areas. We have heard about the position in Dyfed. The position in Gwynedd is not good at all. Gwynedd kept substantially below the target set by the GRE, and that was because of cuts it had to make and further cuts that are threatened in order to keep expenditure down. There is talk of axeing the teaching of musical instruments, and we are seeing the inability of Gwynedd to fulfil the infrastructure needed for the all-Wales strategy for mentally handicapped people. We are seeing a lack of finance for joint funding of schemes between the social services and the health

authority. That is the price we have to pay to meet targets which are not related to the acknowledged level of need in Gwynedd as elsewhere.
We are seeing problems in counties such as Dyfed. Dyfed has a GRE-recognised need of £133·1 million, and an expenditure forecast of £132·4 million, which is less than the GRE, less than the recognised need in Dyfed. In spite of that, the target has been set at £130 million. Dyfed is £2·4 million above the target and is being penalised by £3·1 million.
That is a devastating situation for Dyfed. Interestingly enough, I believe that Dyfed is the only county council in Wales since reorganisation which has not elected an official Conservative county councillor. Is this the price to be paid? [Interruption.] I hear someone say that that is because no one will stand as a Conservative candidate. That is a fascinating reflection on the situation. I wonder whether that is why the county is being clobbered in the settlement? Or is it because Dyfed county council recently passed a vote of no confidence in the Secretary of State and called for his resignation? The people in the right hon. Gentleman's own area will have to pay for the Government's imposition on the county council and the people of south Pembroke should bear in mind that the actions of their own Member of Parliament have led to this.
Dyfed faces the possibility of having to cut 103 teaching posts, although the need for them is very great. If the Secretary of State thinks that the council can dip into its reserves, I should inform him that the reserves amount to about £900,000. If the teachers' pay increase is 5¾ per cent. instead of the 4¼ per cent. that has been budgeted. that will take a further £600,000 from the reserves arid the council will have virtually nothing left. Central Government must take responsibility for the full pay settlement, because with a financial régime of this kind it would be utterly unfair to pass the burden on to local authorities which do not have the resources to meet it.
If the same pattern of increased burdens continues next year Dyfed will need a further £10 million. The ratepayers will then have to face a 30 per cent. or 40 per cent. increase in rates or the county will face bankruptcy. That is the crazy logic of a regime which penalises a county which is spending less, not more, than its GREA but which cannot meet the unrealistic targets set by the Government.
The same applies to Mid-Glamorgan, an area of tremendous social need. Again, if any part of Wales has enormous social needs it is Merthyr Tydfil, an area which I know well. In Wrexham, unemployment is constantly increasing. Then there are the problems of Ynys Môn. As we have heard, members of the Select Committee on Welsh Affairs were in Llanfair P.G. looking at what was supposed to be a prime tourist sight and seeing the grotesque need for expenditure on developing the station forecourt, car parking facilities, and so on. Yet the local authority is being penalised not for spending more than its GREA but for spending more than the iniquitous target imposed by the Government.
The present arrangements for local government expenditure in Wales do not give people the responsibility and the right to develop services in response to the needs of each locality. The sooner that system is changed, the better.

Mr. Gwilym Jones: As always, I listened with interest to what the hon. Member for Alyn and Deeside (Mr. Jones) had to say from the Opposition Front Bench, but I was even more interested in what he did not say. As a year has passed since we last had a similar debate I thought that the hon. Gentleman might have answered the following quotation which was given in last year's debate
the Chancellor spoke the truth in his Budget speech. His message on public expenditure was loud and clear. We cannot afford it.
I am sorry, but the fact is that nearly everyone is in favour of cuts in public expenditure as a means of helping to solve our economic problems, but very few are prepared to accept the local implications of such a policy."—[Official Report, 18 July 1984; Vol. 64, c. 431]
In fact, that quotation is from the hon. Gentleman himself, addressing the Welsh Grand Committee on 7 May 1975.
I have nothing new from the hon. Member for Alyn and Deeside today. Instead, he gave the familiar litany of statistics and unemployment figures that are trotted out on every occasion in Welsh debates. In the Chamber, in Welsh Grand Committee debates and at Welsh Question Time, as though the hon. Gentleman wished to convince us that he revels in ever higher unemployment.
I have recently had the privilege of visiting the hon. Gentleman's part of the world. I was in his constituency with the Select Committee on Welsh Affairs last week looking into matters of tourism. The week before we were taking evidence about the closure of Courtaulds in Wrexham. I was somewhat gratified to receive the assurance of Wrexham Maelor Council that it was convinced of the need to hold back the lunatic fringe in Wales.
It is almost heartening that the Labour party has changed its view about council house sales and that tenants should not be denied their right to buy. However, councils often complain that they cannot spend their own money. Is it their own money? Surely it is their ratepayer's money. That money has been borrowed and ratepayers have repaid the capital and the interest on it. They are trying to spend the money twice instead of seeking to return that money to the ratepayers and eliminate interest charges.
We would all agree in wanting to see the backlog of renovation grants taking less than the four years described by the hon. Member for Alyn and Deeside. Such small works are important because they create work and employment. We must not neglect such opportunities. We all want effective and efficient spending. I fully support the Government's policies for council spending. While I realise that they are necessary. I look forward to when the implications for council spending are somewhat different. I hope that we can look forward to a greater freedom, particularly in renovation grants for small works.
I was pleased to hear how near local authorities are to achieving the targets set by responsible rating decisions. I noted my right hon. Friend's hope that the 1 per cent. difference between targets and expenditure will soon be eliminated. I welcome the move towards more responsible rating decisions. However, I warn my right hon. Friend that there is a cynical, cycle in Wales which is based on the frequency of two-year local government elections. Certainly in south Glamorgan the rates increase was artificially held down in election year. Many Cardiff ratepayers know that we can expect a big increase in rates next year. This will be a savage burden on the ratepayers

in Cardiff, domestic and industrial, and I warn that the Minister might have to make use of his powers to cut back on excessive spending in south Glamorgan.

Mr. Roy Hughes: This debate is a hardy annual. The Secretary of State presents his proposals as if he were dealing with a bunch of unruly schoolchildren. He threatens to use his authoritarian powers against Welsh local authorities which have to deal with the most terrible social problems in the whole of Great Britain. It cannot be said too often that local authorities in the Principality have always acted with the utmost restraint and sense of responsibility. They deserve better treatment from the Secretary of State.
The councils believe that they could achieve greater efficiency if there were fewer controls on them. The 37 Welsh district councils in the Association of District Councils would like autonomy over their financial affairs. That request was turned down; the councils are getting nowhere in their consultations with the Secretary of State. Hard-pressed authorities such as Wrexham and Merthyr, which has terrible unemployment problems, get nothing but penalties and the money goes into the Treasury coffers.
The Secretary of State tries to make out that his proposals are fair and reasonable. Why, then, do our district councils protest that the rate support grant report will withhold £10 million of block grant from Welsh ratepayers? It is highway robbery and the Secretary of State has become the Dick Turpin of Welsh politics. Money is urgently needed for many public projects throughout Wales.
The district councils allege that the report reduces the relevant expenditure of Welsh local authorities by £6 million and reduces grants by £5·5 million. Those figures illustrate the pressure on our local authorities who have to cope with overwhelming problems.
When the Secretary of State exercises his power to redistribute grants to Welsh districts there will, of course, be winners and losers. Afan, which covers the Port Talbot area, is adversely affected. When a local authority embraces a pattern of expenditure, it is often difficult for it to cut back on projects that it has undertaken. When it attempts to rectify the situation by putting up the rates, there is invariably a public outcry. The Secretary of State is passing the buck to our local authorities. They are having to carry the can for his deficiencies and errors.
We know that the favourite target of the Secretary of State is the Mid-Glamorgan county council in perhaps the most socially deprived county in Great Britain. Umpteen reports have set out all the details of the county's terrible problems, but apparently it is to be penalised.
The story tonight is a depressing one of cuts, cutbacks and restrictions. The message from Brecon and Radnor was that people are calling for improved social services. That is a call of enlightened self-interest and the Opposition fully endorse it. A future Labour Government will restore the freedom of local government and increase the functions of our local authorities. That is the best course for Wales.

Mr. Nicholas Edwards: The hon. Member for Alyn and Deeside (Mr. Jones) said that it was unfortunate that this information came 18 months after the event and the hon. Member for Ceredigion and Pembroke, North (Mr.


Howells) asked why there had been delay. We wait until after the local authorities' accounts have been audited and we have the final figures so that we can make the final adjustments.
The hon. Member for Alyn and Deeside said that it requires a special kind of financial incompetence to produce figures at this late stage. It would require a special kind of financial incompetence for any treasurer not to be aware of the effect of grant on the changes in expenditure, especially changes resulting from interest charges.
The hon. Member for Rhondda (Mr. Rogers) asked about the change. In 1983–84, there was a fall from the assumption of 11·5 per cent. to the actual interest rate of 10·5 per cent. It is that adjustment with which we are dealing. The total resulting from that change was £6,261,000 in Wales. Of the £10 million that has been referred to, £3·8 million was accounted for by holdback. Of the £140,000 difference between the first and the second report in Alyn and Deeside, £63,000 was due to the interest rate change.
My hon. Friend the Member for Ynys Môn (Mr. Best) talked of his constituency's special problems. His local authority has increased rates faster than inflation since 1979 and has the highest manpower growth in any district council in Wales. There has been a 5 per cent. growth in full-time equivalent since 1979. Most districts find that they can provide the same services with less manpower. I wonder whether the increase in manpower is a proper use of expenditure. He was right to say that we are anxious to move away from a system of targets.
I have just completed the consultation process with local government that will lead to the statement on RSG next week. I have already told local authorities that, thanks to that consultation process and the views that they expressed, I hope to be able to get away from the target system in Wales. I believe that both sides of the House will welcome that.
The hon. Member for Caernarfon (Mr. Wigley) rightly emphasised that people care about services. His local authority has increased expenditure on services above the rate of inflation during the past few years. No doubt it has therefore been able to improve services. Several local authorities have been mentioned. Ogwr has got into the extraordinary state of apparently doing some creative accounting against itself, and it has paid money back into reserves and therefore incurred penalty. That seems a clumsy action which reveals a need for advice. I hope that that will be drawn to its attention.

It being one and a half hours after the commencement of proceedings on the motion, MR. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).

Question agreed to.

Resolved,
That the Welsh Rate Support Grant Supplementary (No. 2) Report 1983–84 (House of Commons Paper No. 448), which was laid before this House on 4th July, be approved.

Motion made, and Question put,
That the Welsh Rate Support Grant Supplementary Report 1985–86 (House of Commons Paper No. 449), which was laid before this House on 9th July, be approved.—[Mr. Nicholas Edwards.]

The House divided: Ayes 240, Noes 180.

Division No. 280]
[11.43 pm


AYES


Amess, David
Arnold, Tom


Ancram, Michael
Ashby, David





Aspinwall, Jack
Goodhart, Sir Philip


Atkins, Rt Hon Sir H.
Gorst, John


Atkins, Robert (South Ribble)
Gow, Ian


Baker, Rt Hon K. (Mole Vall'y)
Gower, Sir Raymond


Baker, Nicholas (N Dorset)
Grant, Sir Anthony


Baldry, Tony
Greenway, Harry


Batiste, Spencer
Gregory, Conal


Bellingham, Henry
Griffiths, Sir Eldon


Bendall, Vivian
Griffiths, Peter (Portsm'th N)


Benyon, William
Grist, Ian


Bevan, David Gilroy
Ground, Patrick


Biffen, Rt Hon John
Grylls, Michael


Biggs-Davison, Sir John
Gummer, John Selwyn


Blackburn, John
Hamilton, Hon A. (Epsom)


Blaker, Rt Hon Sir Peter
Hamilton, Neil (Tatton)


Bonsor, Sir Nicholas
Hampson, Dr Keith


Boscawen, Hon Robert
Hanley, Jeremy


Bottomley, Peter
Hannam, John


Bottomley, Mrs Virginia
Hargreaves, Kenneth


Bowden, A. (Brighton K'to'n)
Harris, David


Bowden, Gerald (Dulwich)
Haselhurst, Alan


Brandon-Bravo, Martin
Hawkins, Sir Paul (SW N'folk)


Bright, Graham
Hawksley, Warren


Brinton, Tim
Hayes, J.


Brooke, Hon Peter
Hayward, Robert


Brown, M. (Brigg &amp; Cl'thpes)
Heathcoat-Amory, David


Browne, John
Henderson, Barry


Bruinvels, Peter
Heseltine, Rt Hon Michael


Bryan, Sir Paul
Hickmet, Richard


Buck, Sir Antony
Hicks, Robert


Budgen, Nick
Higgins, Rt Hon Terence L.


Burt, Alistair
Hirst, Michael


Carlisle, Kenneth (Lincoln)
Hogg, Hon Douglas (Gr'th'm)


Carttiss, Michael
Holland, Sir Philip (Gedling)


Chapman, Sydney
Holt, Richard


Churchill, W. S.
Howard, Michael


Clark, Hon A. (Plym'th S'n)
Howarth, Alan (Stratf'd-on-A)


Clark, Dr Michael (Rochford)
Howarth, Gerald (Cannock)


Clark, Sir W. (Croydon S)
Howell, Ralph (N NorfolK)


Clarke, Rt Hon K. (Rushcliffe)
Hubbard-Miles, Peter


Cockeram, Eric
Hunt, David (Wirral)


Colvin, Michael
Hunt, John (Ravensbourne)


Coombs, Simon
Hunter, Andrew


Cope, John
Jessel, Toby


Corrie, John
Johnson Smith, Sir Geoffrey


Couchman, James
Jones, Gwilym (Cardiff N)


Cranborne, Viscount
Jones, Robert (W Herts)


Crouch, David
Joseph, Rt Hon Sir Keith


Currie, Mrs Edwina
Key, Robert


Dickens, Geoffrey
King, Roger (B'ham N'field)


Dicks, Terry
King, Rt Hon Tom


Dorrell, Stephen
Knight, Greg (Derby N)


Douglas-Hamilton, Lord J.
Knight, Dame Jill (Edgbaston)


Dover, Den
Knox, David


Dunn, Robert
Lang, Ian


Dykes, Hugh
Latham, Michael


Edwards, Rt Hon N. (P'broke)
Lawler, Geoffrey


Eggar, Tim
Lee, John (Pendle)


Evennett, David
Leigh, Edward (Gainsbor'gh)


Fairbairn, Nicholas
Lennox-Boyd, Hon Mark


Fallon, Michael
Lloyd, Peter, (Fareham)


Farr, Sir John
Lord, Michael


Favell, Anthony
McCurley, Mrs Anna


Finsberg, Sir Geoffrey
Maclean, David John


Fletcher, Alexander
Major, John


Fookes, Miss Janet
Marland, Paul


Forman, Nigel
Mates, Michael


Forsyth, Michael (Stirling)
Mather, Carol


Forth, Eric
Maude, Hon Francis


Fowler, Rt Hon Norman
Merchant, Piers


Fox, Marcus
Meyer, Sir Anthony


Franks, Cecil
Mills, Sir Peter (West Devon)


Fraser, Peter (Angus East)
Moate, Roger


Freeman, Roger
Monro, Sir Hector


Fry, Peter
Morris, M. (N'hampton, S)


Gale, Roger
Moynihan, Hon C.


Galley, Roy
Needham, Richard


Gardiner, George (Reigate)
Newton, Tony


Gardner, Sir Edward (Fylde)
Normanton, Tom


Garel-Jones, Tristan
Norris, Steven






Oppenheim, Phillip
Terlezki, Stefan


Powley, John
Thompson, Donald (Calder V)


Renton, Tim
Thompson, Patrick (N'ich N)


Rhodes James, Robert
Thorne, Neil (Ilford S)


Roberts, Wyn (Conwy)
Thornton, Malcolm


Robinson, Mark (N'port W)
Thurnham, Peter


Roe, Mrs Marion
Townend, John (Bridlington)


Rost, Peter
Tracey, Richard


Rowe, Andrew
Trotter, Neville


Rumbold, Mrs Angela
Twinn, Dr Ian


Ryder, Richard
van Straubenzee, Sir W.


Sackville, Hon Thomas
Vaughan, Sir Gerard


Sainsbury, Hon Timothy
Viggers, Peter


Sayeed, Jonathan
Waddington, David


Shaw, Giles (Pudsey)
Wakeham, Rt Hon John


Shaw, Sir Michael (Scarb')
Waldegrave, Hon William


Shelton, William (Streatham)
Walden, George


Shepherd, Colin (Hereford)
Walker, Bill (T'side N)


Shepherd, Richard (Aldridge)
Wall, Sir Patrick


Shersby, Michael
Ward, John


Silvester, Fred
Wardle, C. (Bexhill)


Sims, Roger
Warren, Kenneth


Skeet, T. H. H.
Wells, Bowen (Hertford)


Smith, Sir Dudley (Warwick)
Wells, Sir John (Maidstone)


Soames, Hon Nicholas
Wheeler, John


Speed, Keith
Whitfield, John


Spencer, Derek
Whitney, Raymond


Spicer, Michael (S Worcs)
Wiggin, Jerry


Squire, Robin
Wilkinson, John


Stanbrook, Ivor
Winterton, Mrs Ann


Stanley, John
Winterton, Nicholas


Steen, Anthony
Wolfson, Mark


Stevens, Lewis (Nuneaton)
Wood, Timothy


Stevens, Martin (Fulham)
Woodcock, Michael


Stewart, Allan (Eastwood)
Yeo, Tim


Stewart, Andrew (Sherwood)
Younger, Rt Hon George


Stradling Thomas, J.



Sumberg, David
Tellers for the Ayes:


Taylor, Teddy (S'end E)
Mr. Michael Neubert and Mr. Tony Durant.


Temple-Morris, Peter





NOES


Anderson, Donald
Carlile, Alexander (Montg'y)


Archer, Rt Hon Peter
Clark, Dr David (S Shields)


Ashdown, Paddy
Clarke, Thomas


Ashton, Joe
Clwyd, Mrs Ann


Atkinson, N. (Tottenham)
Cocks, Rt Hon M. (Bristol S.)


Bagier, Gordon A. T.
Cohen, Harry


Barnett, Guy
Coleman, Donald


Barron, Kevin
Concannon, Rt Hon J. D.


Beckett, Mrs Margaret
Conlan, Bernard


Beith, A. J.
Cook, Robin F. (Livingston)


Bell, Stuart
Corbett, Robin


Benn, Tony
Corbyn, Jeremy


Bennett, A. (Dent'n &amp; Red'sh)
Cowans, Harry


Bermingham, Gerald
Craigen, J. M.


Bidwell, Sydney
Crowther, Stan


Blair, Anthony
Cunliffe, Lawrence


Boyes, Roland
Cunningham, Dr John


Bray, Dr Jeremy
Dalyell, Tam


Brown, Gordon (D'f'mline E)
Davies, Rt Hon Denzil (L'lli)


Brown, Hugh D. (Provan)
Davies, Ronald (Caerphilly)


Brown, N. (N'c'tle-u-Tyne E)
Davis, Terry (B'ham, H'ge H'l)


Brown, R. (N'c'tle-u-Tyne N)
Deakins, Eric


Bruce, Malcolm
Dewar, Donald


Buchan, Norman
Dixon, Donald


Caborn, Richard
Dobson, Frank


Callaghan, Jim (Heyw'd &amp; M)
Dormand, Jack


Campbell-Savours, Dale
Douglas, Dick





Dubs, Alfred
Martin, Michael


Duffy, A. E. P.
Maxton, John


Dunwoody, Hon Mrs G.
Maynard, Miss Joan


Eadie, Alex
Meacher, Michael


Eastham, Ken
Meadowcroft, Michael


Evans, John (St. Helens N)
Michie, William


Ewing, Harry
Millan, Rt Hon Bruce


Fatchett, Derek
Miller, Dr M. S. (E Kilbride)


Faulds, Andrew
Morris, Rt Hon A. (W'shawe)


Fields, T. (L'pool Broad Gn)
Morris, Rt Hon J. (Aberavon)


Fisher, Mark
Oakes, Rt Hon Gordon


Flannery, Martin
O'Brien, William


Foot, Rt Hon Michael
O'Neill, Martin


Forrester, John
Orme, Rt Hon Stanley


Foster, Derek
Park, George


Fraser, J. (Norwood)
Parry, Robert


Freeson, Rt Hon Reginald
Patchett, Terry


Freud, Clement
Pavitt, Laurie


Garrett, W. E.
Pendry, Tom


George, Bruce
Penhaligon, David


Gilbert, Rt Hon Dr John
Pike, Peter


Godman, Dr Norman
Prescott, John


Gould, Bryan
Radice, Giles


Hamilton, James (M'well N)
Randall, Stuart


Hardy, Peter
Redmond, M.


Harman, Ms Harriet
Rees, Rt Hon M. (Leeds S)


Hart, Rt Hon Dame Judith
Richardson, Ms Jo


Haynes, Frank
Roberts, Ernest (Hackney N)


Hogg, N. (C'nauld &amp; Kilsyth)
Robertson, George


Home Robertson, John
Robinson, G. (Coventry NW)


Howell, Rt Hon D. (S'heath)
Rogers, Allan


Howells, Geraint
Rooker, J. W.


Hoyle, Douglas
Rowlands, Ted


Hughes, Robert (Aberdeen N)
Sedgemore, Brian


Hughes, Roy (Newport East)
Sheerman, Barry


Hughes, Sean (Knowsley S)
Sheldon, Rt Hon R.


Hughes, Simon (Southwark)
Shore, Rt Hon Peter


Janner, Hon Greville
Short, Ms Clare (Ladywood)


John, Brynmor
Short, Mrs R.(W'hampt'n NE)


Johnston, Sir Russell
Silkin, Rt Hon J.


Jones, Barry (Alyn &amp; Deeside)
Skinner, Dennis


Kilroy-Silk, Robert
Smith, Cyril (Rochdale)


Kirkwood, Archy
Smith, Rt Hon J. (M'kl'ds E)


Lambie, David
Snape, Peter


Lamond, James
Soley, Clive


Leadbitter, Ted
Steel, Rt Hon David


Leighton, Ronald
Stott, Roger


Lewis, Ron (Carlisle)
Strang, Gavin


Lewis, Terence (Worsley)
Straw, Jack


Litherland, Robert
Taylor, Rt Hon John David


Livsey, Richard
Thomas, Dafydd (Merioneth)


Lloyd, Tony (Stretford)
Thompson, J. (Wansbeck)


Loyden, Edward
Thorne, Stan (Preston)


McCartney, Hugh
Tinn, James


McDonald, Dr Oonagh
Wardell, Gareth (Gower)


McGuire, Michael
Wareing, Robert


McKay, Allen (Penistone)
Wigley, Dafydd


McKelvey, William
Williams, Rt Hon A.


MacKenzie, Rt Hon Gregor
Winnick, David


McNamara, Kevin
Woodall, Alec


McTaggart, Robert
Young, David (Bolton SE)


McWilliam, John



Madden, Max
Tellers for the Noes:


Marek, Dr John
Mr. Roger Thomas and Mr. Roger Powell.


Marshall, David (Shettleston)

Question accordingly agreed to.

Lloyd's

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lennox-Boyd.]

Mr. Bryan Gould: It is regrettably true that over the past decade or so Lloyd's, the world's premier insurer, has been wracked by a succession of scandals. No one doubts that Lloyd's is now painfully, if somewhat belatedly, grappling with those problems and is doing a great deal to put its house in order, but the consequences of those earlier failures are still emerging, and Lloyd's is inevitably caught up in the need to resolve those outstanding difficulties fairly and effectively.
The most significant of the recent troubles is that involving the PCW syndicates. The way in which Lloyd's and other authorities respond to this case raises at least two matters of substantial public interest.
First, in a case where a number of people at the heart of Lloyd's perpetrated frauds and thefts involving up to £40 million over some years, why have no charges yet been brought? After all, these matters came to light well over two years ago. Fraud cases are admittedly complicated, and the major figures have admittedly fled the jurisdiction, but that should not have prevented the bringing of prosecutions, which in itself would have done a great deal to reassure City opinion—and, indeed, opinion beyond the City—that the authorities were taking these matters seriously.
The dilatoriness of the Director of Public Prosecutions leaves a real question mark over the Government's determination to deal with City fraud. There is a sharp contrast between the huge police operation which was mounted in Oxford a year or so ago to bring to heel a handful of some of the most vulnerable people in our society—those who had allegedly been party to minor social security frauds—and the zeal shown in apprehending them, and the failure so far to take any action whatever in the courts in respect of fraud on a truly massive scale. That sharp contrast must leave the Government open to charges of double standards. They must answer the question: why is it that there appears to be one rule for those who transgress in a minor way, but apparently a quite different rule—and one which does not seem to be applied—for those involved in substantial fraud in the City?
The second major issue of public interest arising from the PCW affair is the damage which has been done to Lloyd's and to the City's reputation. It is damage which arises not just because of the original fraud and Lloyd's failure to prevent or detect it, but now also by virtue of the inadequacy of Lloyd's response to the substantial losses which have since emerged.
It might be useful if I briefly recount the history. In 1982 it became clear that two underwriters, Peter Cameron-Webb and Peter Dixon, had over a long period defrauded the names for whom they managed underwriting syndicates, and defrauded them of as much as £40 million. The chairman of the parent company of the managing agent, the brokers Minet, was involved also in the frauds to a minor degree. When this came to light, Minet was active immediately in recovering some of the money, and with another major broking firm contributed some of its own money to make good and cover the losses. The names who accepted the offer of money from Minet under the

arrangement—over 99 per cent. of those involved accepted—did so on condition that they signed an agreement which prevented them from bringing any further legal proceedings against Minet or anyone else in respect of the losses. In effect, they assigned their legal rights to a company set up jointly by Minet and the other broking firm which was involved.
The Department of Trade and Industry, Lloyd's and Minet all set up inquiries into what had gone wrong; little has emerged as a consequence of the inquiries so far. All those institutions, including the Department, have purported to regard the £40 million loss which became apparent in 1982, and the arrangement which was then made to reimburse those who were defrauded, as a self-contained episode under which a line could safely be drawn. Unfortunately, that does not seem possible any longer. It has now emerged that substantial further losses have emerged. The names have been called upon in recent months to contribute over £60 million this year, and it is estimated that their total liabilities may be as much as £130 million.
It is the question of how to treat the new development which is the real issue in the debate. Lloyd's takes the view that these further and potential losses are to be regarded as ordinary trading losses, that they have nothing to do with the earlier fraud, and that the principle of unlimited liability must therefore apply to them. The Minister wrote in a recent letter that he sees no case for extending his departmental inquiry into the original fraud to cover the new situation which has been revealed. Minet, whose chairman I met a day or two ago, says that it did all that could be expected of it to resolve the problems caused by the PCW fraud and that subsequent losses are little to do with it and not its responsibility.
These attitudes cannot be supported. They are fatally undermined by what we now know about the way in which the PCW syndicates were operated and by the way in which the victims of the fraud have been dealt with. First, there is the deal which the names were told would resolve the problems and which involved their signing away any further rights that they might have. That deal is now seen to have been seriously deficient. If it were tested in the courts, it would in all probability be found to be invalid. This is because information which was available to Minet and Lloyd's at the time that the deal was signed last year, and which was material to the question of further losses, was at the very least not properly interpreted by Lloyd's and Minet, and was certainly not disclosed to the names. The deal is almost certainly vitiated by the fact of nondisclosure to the names.
Secondly, an independent inquiry carried out by Price Waterhouse, and recently handed over to the steering committee of names affected, shows that the accounts of the syndicates over a long period were "grossly manipulated" and that material facts were concealed. Those are matters for which Minet, as the parent company, and Lloyd's, as the supervising authority, must surely bear some responsibility.
Further, the money which was recovered by Minet and used by it to reimburse names for the originally disclosed losses of £40 million was obtained by the cancellation of certain reinsurance contracts. In view of the way in which other reinsurance arrangements operated, which were conducted through PCW-controlled companies and which were described by Price Waterhouse as extremely prejudicial to the interests of the names mainly affected by


the losses, and because of the underlying context of the way in which the reinsurance arrangements worked, the consequence of the deal and the cancellation and return of premiums on some reinsurance contracts was to leave the names without any effective reinsurance cover. The fact that the price of accepting the deal was to leave them without that cover was not made clear to the names at that time.
The fourth point—admittedly it affects only a small group of names—is that that minority of names which insisted, despite strong pressure to dissuade them from doing so, on taking out stop-loss policies, have now discovered that those policies were placed with PCW baby syndicates and were framed in terms which makes them worthless. As ordinary Lloyd's policyholders, therefore, as well as in their capacity as investors in Lloyd's, those names who took out those policies have good reason to feel aggrieved.
Fifthly, it is clear that much of the underwriting done on behalf of the names over that period, which involved a high proportion of long-tail business, much of it to do with insuring against asbestosis claims in the United States and in respect of which the recently disclosed losses principally arise, was done in breach of Lloyd's rules and limits on the amount of underwriting to be done. That was something, again, that Lloyd's failed to detect or prevent.
The whole miasma of accounts being manipulated, of reinsurance arrangements which were fraudulent and prejudicial, of insurance policies which turned out to be worthless, of failure to disclose material facts and of breach of some of the most fundamental rules, leave the names, who are now required, according to Lloyd's to pick up the bill for losses which might amount to £130 million—all arising as the result of a succession of nefarious practices—feeling not a little hard done by. Few objective observers would not conclude that they have justice on their side.
What is more important, the combination of events makes it extremely difficult for Lloyd's to adhere to its position of disclaiming responsibility for what has happened and of maintaining, with the Department, that the losses arose from an ordinary course of trading.
The truth is surely that those further losses arose, as did the earlier ones, which are plainly attributable to fraud, from one continuous course of conduct. There were fraudulent defalcations which had the inevitable consequence that the underwriters involved in that fraud were then compelled to give top priority to maximising immediate premium income—irrespective of the nature of the business, the risk undertaken and the Lloyd's rules—with the prime and overriding objective of getting in the money so that they could conceal the fraud and escape detection for as long as possible.
It is not possible to draw a line under the £40 million loss, which is attributed to fraud, and then to say that any further losses were unrelated and that the ordinary principles of unlimited liability should apply.
Lloyd's responsibility is engaged, because throughout the period it was, and claimed to be, the regulatory and supervisory authority. It was its responsibility to ensure that the rules were enforced, that fraud was detected and that the managing agents were not just competent but honest. I make that latter point because I believe that the chairman of Lloyd's is on record as saying that the

responsibility of Lloyd's is to ensure that managing agents are competent, but he stopped short of saying anything about honesty. I cannot believe, according to the principles applied by Lloyd's, that it is possible to be competent and yet to be dishonest.
Lloyd's has not so far faced its responsibilities, and the consequences of a continuing failure to do so will be extremely damaging, not least to Lloyd's. There is the prospect of protracted and expensive litigation, dragging through the courts for years to come, guaranteeing unfavourable publicity for Lloyd's throughout that period.
The whole process will certainly be repeated on a much grander scale in the American courts, as a number of American names are also involved. It remains to be seen whether in any litigation Lloyd's would attempt to avail itself of the defence available under section 14 of the Lloyd's Act 1982, which grants Lloyd's immunity against legal action. That provision may be held not to apply retrospectively to acts and omissions which arose before 1982.
If Lloyd's were to attempt to rely upon that defence it would be ironic, because it insisted on that provision when the 1982 Act was being discussed, on the ground that it was essential to provide it with a important instrument for carrying out that supervisory function. It would be ironic, to say the least, if it were now to use that provision as a shield to protect themselves against the consequences of the failure of carrying out that duty to supervise.
The City of London is going through a difficult period of rapid change. Therefore, it is important that City institutions are seen to be operating properly in the interests of investors and the wider public. Lloyd's can, if it wishes, continue to bury its head in the sand for a time, but the losers would be not only those who have been the victims of the fraud, which it was Lloyd's responsibility to prevent, but the good name of Lloyd's and the City of London.
One consequence would be the discrediting of the principle of self-regulation. Why should anyone in these circumstances be prepared to entrust to Lloyd's the privilege of self-regulation when the record shows not only its failure to prevent abuses—a failure that involves not just a few crooks at the margin but some of those at the heart of the Lloyd's establishment, which is what is such a cause for concern—but its failure to take responsibility for the fact that it has not carried out its supervisory duties effectively?
The consequence of this is that a new Labour Government would be obliged to look again at how Lloyd's is regulated, just as we would wish to see self-regulation in the City looked at again. In the new circumstances arising in the City, with such a rapid change of institutions and technology, there is likely to be a premium on the dearest and most direct form of statutory provision, without undue bureaucracy, but at least guaranteeing to investors adequate protection.
In the meantime, the Minister has a major responsibility. His Department has the overall responsibility for supervising the insurance industry. He must talk to the Lloyd's council and extend the ambit of his inquiry to cover the events that have occurred subsequently. He must knock some heads together. The future operation and good name of the City are at stake. No one suggests that Lloyd's should take the full financial burden of what is happening. Lloyd's must at the least take the responsibility of


negotiating an agreement that is seen to be fair and acceptable to all the parties. The Minister's duty is to guide Lloyd's towards that point.

Sir Anthony Grant (Cambridgeshire, South-West): I piloted through the Lloyds Act in 1982. That Act was supported by the Opposition, most notably and competently by the hon. Member for Oldham, West (Mr. Meacher). The Lloyd's council has exercised its powers under the new legislation responsibly. It is right to have an inquiry, but it must not be unduly delayed. The worst thing for the good name of Lloyd's, and for everybody else, would be a prosecution that failed. That would be disastrous. I am sure that my hon. Friend the Under-Secretary will deal with that.
The only point that should be stressed—and I hope that my hon. Friend the Under-Secretary will stress it for the good name of Lloyd's and the City—is that the scandal and dreadful plight of the syndicate names is internal. No policyholder outside has suffered the loss of a single penny.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher): I am glad that the hon. Member for Dagenham (Mr. Gould) acknowledged that Lloyd's has been reviewing the rules and regulatory procedures with great energy for some time, and it is putting its house in order. However, I cannot agree to any suggestion to the effect that it is burying its head in the sand.
The hon. Gentleman referred to the Government's monitoring of Lloyd's, concentrating particularly on the developments surrounding the syndicates that are under pressure. The hon. Gentleman gave an account of the events that took place at Lloyd's, which is helpful because it saves me from doing so in the short time available, even if it was his version of events.
It is plain that the matters connected for example with the Richard Beckett Underwriting Agencies Ltd. involve a complicated chain of circumstances. However, I refer immediately to the point raised by my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) because it is a very important and basic point for the House to remember. The policyholders, the consumers, are not at risk in any of the matters that are causing concern in the House and elsewhere.

Mr. Gould: I think that the Minister will accept that those who took out stop-loss policies are in a special category, and are at present at risk as Lloyd's policyholders.

Mr. Fletcher: I accept that those people are in a special category.
Against that background, I should like to summarise the actions that have been taken by the Government and Lloyd's. Allegations of irregularities in the conduct of companies within the Alexander Howden Group PLC and Minet Holdings PLC Groups emerged in the autumn of 1982. Inspectors were appointed by the Department of Trade and Industry in September and November 1982, under section 165 of the Companies Act 1948, to investigate the affairs of both groups.
I should like to make it clear that the Department maintains close contact with the inspectors. Their

investigations are well advanced and they are keeping an close touch with current developments, including the recent report by Price Waterhouse, which has been made available to them and the Department. The matters dealt with in the report are within the scope of the inspectors' investigation. If it were necessary to extend the inspectors' powers in any of those matters, that would be done.
I expect to receive the inspectors' reports early next year. It is my expectation that both reports will be published, with the qualification that to avoid any possible prejudice, publication would be delayed while prosecutions were under consideration or in progress.
As the hon. Gentleman acknowledged, the question of prosecution is a matter for my right hon. and learned Friend the Attorney-General and the Director of Public Prosecutions, but my Department is in close touch with the DPP, and police investigations are continuing.
As a self-regulating market, Lloyd's has its own powers to deal with irregularities. In the Howden and Minet matters, the initial step was to appoint committees of inquiry comprising leading counsel and an accountant. Both inquiries have reported, the reports were made available to the Department, the Department's inspectors and the Director of Public Prosecutions. The investigations have led to disciplinary action by Lloyd's against a number of individuals.
Looking at the position generally, one sees that there have been a number of other matters where investigations have been initiated. Lloyd's keeps the Department informed of those matters, and the police or the Director of Public Prosecutions are also informed by Lloyd's where necessary.
The council of Lloyd's has taken other actions in relation to RBUA and its syndicates. There has been the decision to introduce a new agency company, headed by Sir Ian Morrow and others from outside Lloyd's. There is the new fact-finding investigation into RBUA's operations from 1983 onwards, and there is the extension of the date for members to show their ability to comply with the solvency test.
The normal date for the test cannot be extended for long, because Lloyd's has to prepare statements of the whole business of Lloyd's and other documents for submission to regulatory authorities in many parts of the world to comply with local legislation. I understand that a majority of the 375 members affected by RBUA's losses have now met the solvency test.
It appears that some of the latest problems stem from the particular sort of risks underwritten. Insurance companies around the world bear the financial scars of some business underwriten in the United States of America. The size of the wound became clearer to many during 1984. Members of Lloyd's participating in syndicates with a substantial exposure to this business are not free from the consequences.
I emphasise, therefore, that both Lloyd's and the Government took action when it became apparent that there were problems. Lloyd's has taken disciplinary action where appropriate and has launched its own inquiry into the latest difficulties of the affected syndicates, as well as taking various other measures to help the names involved.
We are keeping in close touch with Lloyd's and we promptly sent in Companies Act inspectors to the Peter Cameron Webb syndicates when it was clear that there


might be fraud or malpractice. I repeat that we can extend the investigations should other matters come to light which make it necessary to do so.
The DPP is considering the evidence gathered in the course of the inspections and, as I said, police investigations are in progress. These are, however, complex areas and I am sure that the hon. Gentleman will appreciate the need for a proper case before bringing criminal charges, frustrating though that may be to those who, clearly, would like to see justice being done. While we regret the fact that some names are facing substantial losses, there is nothing to imply that a Government inquiry into Lloyd's generally is either necessary or desirable at this stage.
To put matters into perspective, it is worth making two points. First, in respect of the 1982 year of account, there were 431 syndicates trading at Lloyd's and the losses disclosed by the Beckett agency involved three of those syndicates. Secondly, the total number of members of Lloyd's in 1982 was 20,145 and in 1985 there are 26,050. The number of members affected by the Beckett agency syndicate's losses is 375.
I appreciate the concern that has been expressed in the House about the situation at Lloyd's, and of course we are all concerned about the reputation of Lloyd's which is important to the national economy and which is worldwide, although I understand, somewhat from my own experience of travelling abroad and from information I have from Lloyd's, that its business is not suffering in any way from the inevitably bad publicity that is following on these matters. It is sometimes necessary when travelling abroad to make the point that my hon. Friend

mentioned, namely, that the consumer, the policyholder, is not in any way at risk as a result of the matters that have taken place at Lloyd's.
I believe that proper action is being taken by Lloyd's and by the Government and, as I said, we shall use the powers available to us if events prove that a further extension of the investigation or some other action is required by the Department. But I cannot accept the suggestion, put albeit mildly, by the hon. Gentleman that the events at Lloyd's are in any way a criticism of self-regulation. Since the new powers were made available to Lloyd's in 1982 by Parliament, Lloyd's has moved vigorously and effectively to improve its procedures, and the further need for self-regulation and the extension of powers in this sphere which I expect will from part of legislation next year, covering the whole of the financial services industry—

Mr. Gould: And Lloyd's?

Mr. Fletcher: No, because Lloyd's already has its own powers and, as I said, is exercising those extremely effectively, not least in its attempt to get to the bottom of the difficulties that are the subject of this debate.
In the legislation that I hope will come before the House next year, covering financial services generally, lessons will be learnt. Lloyd's will learn lessons from what has occurred and we in the Department and others in the city will learn lessons from these events from the point of view of rule-making and regulation, and I assure the House that we shall put those lessons to good use.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes past Twelve midnight.